“Retirement historically has been about accumulation. Now it’s all about decumulation,” Michael Davis, deputy assistant secretary of labor, told Brian Graff at the 2012 ASPPA 401(k) Summit on Monday in New Orleans.
Fee disclosure is a very important component of retirement, Davis said. “A lot of big guys can get that information from providers, but for small plans it can be hard to extract that information.”
The Department of Labor’s fee disclosure rules are an attempt to “level the playing field and help participants make affirmative decisions,” he told attendees, adding that the rules were “good for participants, who are the ones paying the fees.”
Rule 404(a)(5) provides plan participants an apples-to-apples comparison across product types, Davis said. In the past, different products have been regulated by different entities.
Model portfolios and how they will be regulated under the new rules have been a concern for many advisors, Graff said. Davis assured him that guidance on how to report performance of model portfolios should be available “in a matter of weeks” in the form of frequently asked questions.
“We’re in the seventh or eighth inning,” he said.
Regarding non-monetary compensation, Davis encouraged advisors to look to Form 5500 for guidance on reporting.
Another point of contention about the new rules has been how to report fee disclosures. A summary format is viewed more favorably by consumers, while a roadmap format has been pushed by trade groups, Graff said. “It’s best to have clarity,” Davis replied. “Industry groups say a roadmap is a good middle ground.” Following the DOL’s request for public comments, the agency didn’t get enough comments to justify one format over the other.