Retirement Plan Discussion Likely to Continue Past 2008 Elections

November 8, 2007 ( - The nation's capital continues to be a beehive of retirement plan-related legislative and regulatory activity which is expected to continue through the 2008 presidential election cycle and into 2009.

That was the conclusion of attorney Jamey Delaplane, a specialist in the Employee Retirement Income Security Act (ERISA), with the Washington, D.C., law firm Davis & Harman who appeared in a Thursday Webinar hosted by the Women’s Pension Exchange. The Women’s Pension Exchange is an organization launched and supported by PLANSPONSOR and Whitmore Retirement Solutions.

A key theme sure to continue driving much of the upcoming activity at the U.S. Department of Labor (DoL), at the Securities and Exchange Commission (SEC), and among Congressional lawmakers is an effort to reform the way retirement plan fees are charged and disclosed to plan sponsors and participants, Delaplane said.

He explained that a good deal of the Washington emphasis on plan fees centers around the DoL’s three-part regulatory project on which the agency is “marching forward,” which includes:

  • Significant changes to Schedule C of the Form 5500 disclosing a detailed summary of fees- including still controversial revenue sharing arrangements- that are expected to be effective with the 2009 plan year,
  • Enhanced provider disclosure to fiduciaries as part of the DoL’s 408(b)(2) effort, “Providers are the ones in possession of the (fee data) and that’s where the bulk of the legal responsibility will fall,” the attorney said.
  • Fee disclosures to participants – a component Delaplane said is likely to be completed during the first quarter of 2008.

A prominent subtext to the proposed disclosure debate, according to Delaplane, is how detailed the new rules should be on disclosing individual fees for particular plan services – particularly if those services are sold on a bundled basis. He said the DoL is not likely to require disclosing information on each piece of a service bundle, but instead is likely to concentrate on: “What does a fiduciary really need to know?”

“It’s clearly one of the biggest challenges the DoL is facing on the fee disclosure issue,” Delaplane added (See DoL Asks For Advice on 401(k) Fee Disclosures ).

For its part, Delaplane commented the SEC is preparing a rule requiring simplified mutual fund disclosure, including information contained in a prospectus, which he said the DoL is likely to use as a regulatory template for other required participant disclosures (See SEC Turning its Attention to 12b-1, 401(k) Disclosures ).

Miller as a Key Retirement Reform Player

Delaplane acknowledged that Representative George Miller (D-California) has become a prime legislative mover in the retirement services area with his own proposed disclosure bill that has drawn a good deal of industry opposition as being overly radical (See 401(k) Fee Disclosure Proposal Draws Industry Criticism at Committee Hearing ).

Even if he is unable to get his bill out of the House – despite political alliances with House Speaker Nancy Pelosi (D-California) – Miller will still “help to shape the debate,” Delaplane noted.

The attorney said Miller and other lawmakers may be reacting to a sense of frustration that the Bush Labor Department has moved too slowly in the retirement plan reform area, and that Congress needs to help goose the process.

Representative Richard Neal (D-Massachusetts) has an alternative fee disclosure bill to Miller's, which Delaplane said is considered less radical (See Legislation Targets Employers Without Retirement Plans ). There has also been activity on the Senate side with a bill expected from Senators Tom Harkin (D-Iowa) and Herb Kohl (D-Wisconsin) (See Kohl to Unveil Senate Version of 401(k) Fee Disclosure Legislation ).

Delaplane predicted a fee bill could move out of the House in 2008, but that getting a Senate companion through the system could be significantly more difficult.

More likely to come out of Congress during 2008 are bills giving more retirement plan rights to returning military service members (See HEROES Act Headed to House for Consideration ), imposing a limit on compensation deferrals as part of a non-qualified deferred compensation plan under 409A (See Special Report: Deferred Comp: Now You See It ), and making a series of technical corrections to the Pension Protection Act passed last year.

Also during Thursday's Women's Pension Exchange Web discussion, Delaplane spoke on the new Qualified Default Investment Alternative (QDIA) rules (See More Details of Final QDIA Regulation Emerge ). He said DoL regulators have promised to release a detailed list of questions and answers dealing with particular scenarios on how various provisions are to be implemented.

Even though there are not likely to be many Washington fireworks in relation to retirement plan issues before the 2008 elections, Delaplane pointed out that the discussions are still important because they will shape the continuing debate during the presidential campaign.

They will also play a key role in shaping discussions of future tax policy when many of the Bush tax cuts expire in 2010, he said.