The warning came fromBradford Campbell, the Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA) and the Bush Administration’s point person on fee disclosure reform, during testimony before the U.S.Senate Committee on Health, Education, Labor and Pensions.
Campbell, who had previously warned lawmakers not to work at cross purposes with his agency’s regulatory powers, asserted in Wednesday’s testimony that the DoL rulemaking process was the best option to deal with arguments that retirement plan fees need to be comprehensively disclosed.
“The regulatory process currently under way ensures that all voices and points of view will be heard and provides an effective means of resolving the many complex and technical issues presented,” Campbell testified. “I hope that as Congress considers this issue, it recognizes the Department’s existing statutory authority and takes no action that could disrupt our current efforts to provide these important disclosures to workers.”
The regulator recounted the history of EBSA’s three-pronged fee disclosure scheme (see EBSA Finishes Regulatory Package with Participant Disclosure Proposal ) that included information transmitted:
- by plan sponsors to regulators and the public through the Form 5500 annual report,
- by service providers to plan fiduciaries to help in judging the reasonableness of the provider’s compensation and potential conflict of interest;
- by plan sponsors to participants to help them make investment decisions.
Also testifying Wednesday was Olena Berg Lacy, a former EBSA director, and currently a director and senior advisor for Financial Engines, who represented the Pension Rights Center. Lacy praised the EBSA three-part regulations but contended that the one dealing with provider disclosures to plan sponsors "do not go far enough."
"Most importantly, the DoL failed to require that expenses be unbundled," Lacy argued. "Without separation of fees for the different categories of investment management, plan administration, and participant services, it will be difficult, if not impossible, for small and medium-size plan sponsors to make comparisons among different offerings."
Lacy argued that a deficiency in the provider to plan sponsor information flow also would hurt the information plan sponsors could provide to employees. "Indeed, one can assume that if the plan sponsor disclosures are inadequate, they will not be conveyed to participants in a way that is meaningful and can be easily understood," Lacy contended. "The information should be unbundled at the participant, as well as the sponsor level...at the very least, fees for the different categories of services should be separately disclosed."
Small Business Concerns
Meanwhile, Paul Hunt, p resident of Millennium Advisory Services, Inc., who testified as a small business representative of the U.S. Chamber of Commerce, contended the heavy focus on plan fees in recent months may have the unintended consequence of scaring small business owners away.
"Unreasonable administrative requirements, additional liabilities, and potential cost increases could drive small businesses away from the private retirement system," Hunt testified. "At a time when small business retirement plans are beginning to experience success, we should encourage these efforts by creating requirements that fully consider the concerns and possible consequences to small business plan sponsors."
Wednesday's Senate testimony is available here .