The Labor Dept. is readying a proposal that would force service providers to make more plan info available. Meanwhile, a House committee is said to be unveiling similar legislation this week
The Labor Department is expected by June to introduce its proposed regulations on how 401(k) service providers — including advisers — should disclose their fees to plan sponsors, Michael L. Davis, deputy assistant secretary, told attendees yesterday at the American Society of Pension Professional & Actuaries' 401(k) Summit. The agency expects to have another rule on how these firms should disclose fees to plan participants shortly thereafter, he said.
Mr. Davis declined to go into the specifics of the proposals, but said that the goal was to increase transparency in the 401(k) space. “You think of food labeling, we think it is equally important to know the ingredients that make up a 401(k) plan.” The service provider proposal was submitted to the Office of Management and Budget on March 3. The proposal on how fees should be disclosed to plan participants will “be right behind it,” Mr. Davis said.
Meanwhile the House Ways and Means Committee is expected to introduce its fee disclosure bill this week, Brian Graff, executive director, CEO of ASPPA, said in an interview. And while advisers have expressed support for greater fee transparency in the 401(k) market, many are worried that the Labor Department won't give service providers a sufficient amount of time to comply.
The original proposed regulations, which were fashioned under the Bush administration, called for a 90-day effective date. “I don't think that's enough time,” Mr. Graff said during a panel discussion with Mr. Davis yesterday. “The Hill has said its effective date is 2012, so you might want to keep that in mind.”
For advisers, the new fee disclosure rules could well change the way some are compensated. What's more, it might take some work to explain their compensation to plans and plan participants, Mr. Graff said. But most advisory firms have been so focused on the 401(k) advice regulations, which were proposed earlier this month, that they haven't been focused on the fee disclosure issue.
“It's the kind of thing their compliance departments focus on first,” he said. “But once they get it, some are going to find that it will change the way they do their business.”
