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Witnesses Clash Over Plan Disclosure Rules

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Groups representing large and small benefit plan service providers are continuing to battle over proposed reporting regulations.

Witnesses squared off Monday at a hearing organized by the Employee Benefits Security Administration, an arm of the U.S. Labor Department.

The Labor Department has issued proposed regulations that call for benefit plan providers to give employers far more information about matters such as compensation, but the department has given only general guidelines about how much detailed information providers of “bundled” services ought to disclose.

Bruce Ashton spoke for the American Society of Pension Professionals & Actuaries, Arlington, Va., and the Council of Independent 401k Recordkeepers, Arlington, groups that tend to represent smaller providers of “a la carte” services,

The Labor Department ought to require all plan providers to break out investment fees and expenses, transaction fees, and expenses, and record-keeping and administrative fees and expenses, Ashton said.

“In the small plan market, this type of disclosure would be essential to provide the most meaningful disclosure to decision makers,” Ashton said.

Larry Goldbrum, general counsel spoke for the SPARK Institute, Simsbury, Conn., a group that represents insurers, banks, mutual fund companies and other companies that tend to provide bundled services.

“The retirement plan and investment industries are very competitive and dynamic, so no single form or methodology can adequately address the diversity of products and service structures without favoring one segment of the industry over others,” Goldbrum warned.

Mandating rigid disclosure requirements could increase costs for service providers and plan participants, Goldbrum added.

Goldbrum noted the department said in the proposed regulations that bundled providers would not have to unbundle their services and disclose the internal allocation of fees among affiliated companies.

“Bundled providers should disclose their compensation and fees for the services they consider to be part of their bundled arrangement, but should not be obligated to make disclosures for other entities and services that the bundled provider does not consider to be part of its bundled arrangement,” Goldbrum said.

“For example,” Goldbrum said, “when a bundled service provider, at the direction of a plan sponsor, makes payments to a third party that the service provider does not consider to be part of its bundled arrangement, the third party should be responsible for satisfying any applicable disclosure and contractual obligations under the final regulations.”

Meanwhile, groups representing brokers focused on provisions of the proposed regulations dealing with disclosure of broker compensation.

All compensation, direct and indirect, to be received by a service provider would have to be disclosed in writing. The proposed rules also require the disclosure of any conflicts of interest that might affect a plan

Cameron Findlay, who spoke for the Council of Insurance Agents and Brokers, Washington, noted that the fee disclosure requirements in the proposed regulations would apply to health and welfare plans but appeared to be written mainly with retirement plans in mind.

“The insurance brokerage industry is a different animal,” Findlay said.

For health insurance brokers and other insurance brokers, disclosing future compensation would be impossible, because it is difficult to know how big compensation will be in advance, and because it is difficult to project contingent or discretionary compensation revenue amounts.

Ashley Gillihan, who testified on behalf of the Self-Insurance Institute of America, Simpsonville, S.C., said disclosures of employee health plan insurance fees should include both “commissions” and other forms of compensation, such as contingent commissions or overrides.

Without information about overrides, an employer may not be able to make a valid comparison of self-insured and fully insured insurance plans, Gillihan said.


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