Proposed regulations to enhance disclosures to beneficiaries of retirement and other benefit plans have drawn criticism from agents, brokers and the plans themselves as being burdensome and potentially overwhelming to those they seek to protect.
The proposal, one of several being undertaken by the Department of Labor under pressure from Congress and consumer advocates, would require that contracts between certain service providers and plans provide for specific and detailed information. Additionally, all services furnished to a plan and all compensation, direct and indirect, to be received by the service provider would have to be disclosed in writing, and the proposed rules also require the disclosure of possible conflicts of interest of the service provider that may affect the performance of plan services.
In comments on the proposal, however, groups representing agents and brokers argued that the proposed rules would be overly broad, and called on the department to revise the proposal.
The Independent Insurance Agents and Brokers of America argued that the proposal relies too heavily on a “one-size-fits-all disclosure paradigm” which it argued would create an “unprecedented” burden of disclosure.
In a comment letter by Robert Rusbuldt, president and CEO, the IIABA argued that “there is no basis or justification for imposing such a broad administrative burden on an industry that is already heavily regulated, especially when the ramifications for failing to adhere to the strict letter of the regulation would be severe.”
That sentiment was echoed in comments from the Council of Insurance Agents and Brokers, which noted that in addition to being “heavily regulated” by the states, most carriers also require “significant disclosure” as a contractual matter.
“We fully understand the Department’s interest in putting some specificity into the requirements but we urge the Department not to rush to cover all plans and all service providers under one regime,” CIAB President Ken Crerar said in a comment letter. “The adage that one can’t fit a square peg into a round hole may hold true here.”
In fact, the CIAB argued that while the department sought to propose a rule that would encompass a broad array of employee benefit plans, perhaps its execution was somewhat more focused.
“We have studied the proposed regulation carefully and respectfully, we believe it was written with a different set of service providers in mind,” said Crerar. “To our thinking, the regulation is focused on, and most appropriate to, 401(k) plans. Indeed many of its requirements make sense for 401(k) plans. We are concerned, however, that it is not consistent with the way insurance products are sold to fund welfare plans.”
The IIABA also argued that the marketplace “is already ensuring” that plan sponsors possess helpful and useful information “and there is nothing” in the proposal and accompanying discussion that suggests that plans are “unable or hindered” in their efforts to obtain the information they need to chose insurance service providers.