The DOL Retirement Plan Pipeline in 2014

December 30, 2013 (PLANSPONSOR.com) – The retirement industry is anticipating a fiduciary re-definition and rules about lifetime income illustrations for plan participants, but there is much more in the pipeline.

In its regulatory agenda, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) says it anticipates issuing a proposed rule regarding lifetime income illustrations on participants’ retirement account statements in August 2014. The new proposed definition of fiduciary—or as the EBSA now calls it, the conflict-of-interest rule—is also slated for August.

The agency also says it will review the use of brokerage windows in participant-directed individual account retirement plans covered by the Employee Retirement Income Security Act (ERISA). Instead of offering a limited number of investment options chosen by a plan fiduciary, a brokerage window may give plan participants access to a broad range of diverse investment alternatives available on the market. This rulemaking project will explore whether, and to what extent, regulatory guidance on fiduciary requirements and regulatory safeguards for such arrangements are appropriate for plans that allow participants to direct investments through brokerage windows (see “Rules/Regs: Brokerage Window-Only Plans Could Be Problematic”). EBSA expects to begin this review by issuing a Request for Information in April 2014.

Final rules issued in 2012 require covered service providers to make certain disclosures to responsible plan fiduciaries in order for contracts or arrangements between the parties to be considered reasonable under Section 408(b)(2) of ERISA. The agency anticipates amending the disclosure provisions so that covered service providers may be required to furnish a guide or similar tool along with such disclosures. A guide or similar requirement may assist fiduciaries, especially fiduciaries to small and medium-sized plans, in identifying and understanding the potentially complex disclosure documents that are provided to them or if disclosures are located in multiple documents. EBSA plans to issue a notice of proposed rulemaking (NPRM) in January 2014.

In 2008, the DOL issued a regulation pursuant to Section 404 of ERISA that establishes a safe harbor for satisfaction of fiduciary responsibilities in selecting an annuity provider and contract for benefit distributions from an individual account retirement plan. More recently, the DOL and the Department of the Treasury published a Request for Information Regarding Lifetime Income Options for Participants and Beneficiaries in Retirement Plans (RFI), seeking comments about what measures they could take to encourage such plans to offer annuities or other arrangements that provide a lifetime stream of income after retirement (see “Feds Call for Lifetime Income Product Public Comment”). Based on the RFI comments, the EBSA is developing proposed amendments to the annuity selection safe harbor primarily focused on the condition in the safe harbor relating to the ability of the annuity provider to make all future payments under the annuity contract. The agency plans to issue an NPRM in October 2014.

EBSA also plans to finalize rules for annual funding notices and summary annual reports for defined benefit (DB) plans. The proposed rule was issued in November 2010 (see "EBSA Releases DB Funding Notice Proposed Rule”), with a comment period that ended in January 2011. The EBSA plans to issue a final rule in March 2014.

Plan sponsors can also look for an amendment to the DOL’s qualified default investment alternative (QDIA) regulation, which provides relief from certain fiduciary responsibilities for fiduciaries of participant-directed individual account plans who, in the absence of directions from a participant, invest the participant's account in a QDIA. The amendment will provide more specificity to fiduciaries as to the investment information that must be disclosed in the required notice to participants and beneficiaries. This amendment also will enhance the information that must be disclosed concerning target-date, or similar age-based, QDIAs. The proposed rulemaking also will amend the participant-level disclosure regulation under ERISA Section 404a-5 to require the disclosure of the same information concerning target date or similar investments to all participants and beneficiaries in participant-directed individual account plans. The EBSA issued a proposed rule in November 2010 (see “EBSA Unveils Target-Date Disclosure Proposal”). It plans to issue a final rule in March 2014.

On April 21, 2006, the DOL published a package of regulations, collectively titled Termination of Abandoned Individual Account Plans, which facilitate the termination of, and distribution of benefits from, individual account pension plans that have been abandoned by their sponsoring employers. In 2014, it will examine whether, and how, to amend those regulations by expanding the scope of individuals entitled to be a "qualified termination administrator" (QTA). Under the Termination of Abandoned Individual Account Plans regulations, only a QTA is authorized to determine whether an individual account plan is abandoned and to carry out related activities necessary to the termination and winding up of the plan's affairs. A proposed rule was issued in December 2012 (see "DOL Suggests Abandoned Plan Use by Bankruptcy Trustees”). The agency plans to issue a final rule in April 2014.

The DOL's regulatory agenda may be downloaded from here.

«