PSNC 2012: Washington Update

June 8, 2012 ( – What regulatory changes are in store for retirement plans?

The answer that comes to mind immediately is the upcoming fee disclosure rules. Bruce Ashton, partner at Drinker Biddle & Reath LLP, told attendees of the 2012 PLANSPONSOR National Conference that the requirement for retirement plan fiduciaries to evaluate plan fees is not new, there is just a stronger framework now that sponsors are required to get fee information from providers.  

Roberta J. Ufford, principal at Groom Law Group, Chartered, noted that retirement plan sponsors are not only required to get fee information from plan providers, but they must make sure the information they receive is complete and evaluate the fees for reasonableness. The 408(b)(2) regulations say if plan sponsors do not receive all the required information from a provider, they must ask for it, and if they do not receive it after 90 days, sponsors must notify the Department of Labor (DOL) and fire the provider.  

When it comes to participant disclosure rules under 404(a)(5), Ashton recommended plan sponsors carefully review the answer to question 30 in the recent FAQs issued by the DOL, which relates to the treatment of brokerage windows (see “DOL’s Answer in Fee Disclosure Guidance ‘Surprising’”). He said the answer provided clarity, but can be confusing.  

Ufford also reminded conference attendees that if they want to provide fee disclosure information to participants electronically, they must have affirmative consent from participants. 

Although fee disclosure is a big issue for plan sponsors, it is not the only development out of Washington that can create changes. Ashton brought up the recent DOL advisory opinion about open multiple employer plans (MEPs). The agency said it does not consider a plan adopted by unrelated employers to be a single employee benefit plan (see “DOL Says Open MEPs Not Single Employee Plans”). This means an open MEP administrator cannot provide one Form 5500 for the plan to the DOL. Each employer must have its own. 

Ashton also thinks the industry will see requirements for educating participants about an income stream in retirement as plan sponsors adopt retirement income products to offer with their plan.  

Ufford added that several proposals in Washington mean it is very possible the tax treatment of retirement plans could change (see “Changing Tax Treatment of 401(k)s Will Reduce Accounts”). She advised plan sponsors to speak up against this, as she contended Congress will listen to employers more than lobby groups.