Groups Seek Grace Period for Fee Disclosure Regulations

May 1, 2012 ( - A coalition of organizations asked the Department of Labor (DOL) to institute a one-year transition period to comply with new fee disclosure regulations. 
The regulations, slated to take effect July 1, require service providers to disclose all fees to retirement plan sponsors. In August, plan sponsors will have to disclose their fees to plan participants.

Since the introduction of the disclosure rules, a number of groups have raised objections to various aspects of the regulations, from what they term information that will confuse plan participants to possible bans on commission-based advice.

On Monday, the American Society of Pension Professionals and Actuaries (ASPPA) sent a letter to Michael Davis, deputy assistant secretary of the Employee Benefits Security Agency (EBSA), asking for guidance to clarify “that asset-allocation strategies and models are not themselves designated investment alternatives” (DIAs) and requesting a good-faith transition period of one year.”

Craig Hoffman, general counsel and director of regulatory affairs at ASPPA, was the principal author of the letter, which was sent jointly by the Council of Independent Recordkeepers (CIkR) and the National Association of Plan Advisers (NAPA).   

“Greater fee transparency allows plan sponsors to make better, more informed decisions, which ultimately is to the benefit of plan participants,” Hoffman wrote. “The information provided to participants under the 404(a) regulation will also lead to better investment decisions. However, many participants need additional help in understanding how to benefit from the information they will be given about each of a plan’s DIAs.”

ASPPA members have debated whether asset-allocation strategies, otherwise designated by the plan sponsor as DIAS, would be considered DIAs, Hoffman wrote. “ASPPA believes very strongly that an asset-allocation strategy or model under these circumstances would not and should not be considered a DIA unto itself.”

Hoffman emphasized the organization’s repeated focus on the need for a transition period. “Most providers began the necessary work to implement these regulatory initiatives some time ago,” Hoffman wrote. “Many have made good-faith determinations as to what the regulations require. If clarifying guidance is issued, it should recognize the need for a transition period during which good-faith efforts to comply will be acceptable.”

The organizations’ letter can be read here.

- Jill Cornfield