Requiring all 401(k) plan companies to provide detailed cost reports would be a big help both to independent plan service providers and to plan sponsors.
Thomas Thomasson, president of DailyAccess Corp., Mobile, Ala., made that argument on behalf of the American Society of Pension Professionals & Actuaries, Arlington, Va., and ASPPA’s sister organization, the Council of Independent 401(k) Recordkeepers, Thursday at a hearing on plan disclosures organized by the House Education and Labor Committee.
The chairman of the committee, Rep. George Miller, D-Calif., convened the meeting to promote H.R. 3185, the “401(k) Fair Disclosure for Retirement Security Act of 2007.”
H.R. 3185, introduced by Miller, calls for insurers, mutual fund companies and other providers of “bundled” plan services to provide the same kind of detailed breakdowns of fees for plan services that independent providers of “unbundled services” typically provide.
The U.S. Department of Labor has come out with a tax form revision proposal that would require providers of unbundled plan services to give cost breakdowns but apparently would exempt providers of bundled services from the disclosure requirements, Thomasson said.
Plan fiduciaries have a legal obligation to make sure that plan recordkeeping fees and administration fees are reasonable, Thomasson said.
If bundled providers do not have to provide detailed revenue-sharing information, “it will be virtually impossible for plan fiduciaries to determine the true costs for plan services provided through a bundled arrangement,” Thomason said. “Uniform fee disclosures are needed for plan fiduciaries to make an ‘apples to apples’ comparison of fees for various plan services offered by competing providers.”
Brad Campbell, the assistant secretary of Labor for the Employee Benefits Security Administration, said EBSA is preparing a disclosure regulation proposal and also wants to make sure that plan fiduciaries get the information they need to make informed decisions.
“Our intent is to ensure that service providers entering into or renewing contracts with plans disclose to plan fiduciaries comprehensive and accurate information concerning the providers’ receipt of direct and indirect compensation or fees and the potential for conflicts of interest that may affect the provider’s performance of services,” Campbell said.
Also at the hearing, witnesses generally agreed on the need to establish simple and consistent participant disclosure documents, to avoid overwhelming participants with information that is likely to be ignored.
Links to copies of the written versions of the witnesses’ testimony are available