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DOL Urged to Hold Off on Proposed Fee Guide

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A group of business organizations turned up the heat this week in its campaign against a proposed Department of Labor fee-disclosure guide.

The group, which includes the American Benefits Council, wrote a letter to the DOL complaining that the comment period was too brief and that they have concerns about the very way the need for the guide is being determined.

The idea is to force 401(k) plan administrators to do a better job of disclosing their fees, as reflected when the DOL’s Employee Benefits Security Administration issued final regulations under ERISA section 408(b)(2) in early 2012. 

The DOL followed up with an “information collection request” that sought input from “covered service providers,” or CSPs, on the idea of a guide.

While the EBSA did not require them to, it did encourage the service providers to provide, especially for small- and medium-sized plans, a “guide, summary, or similar tool to assist RPFs in identifying all of the disclosures required under the final rule, particularly when service arrangements and related compensation are complex and information is disclosed in multiple documents.”

As an appendix to its final 408(b)(2) rule, EBSA included a sample guide that it said could be used “on a voluntary basis by CSPs as a model” for that guide. It also said that it intended to propose that CSPs be required to provide a guide, and it has now done so.

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The ICR sought input on EBSA’s proposal to hold a number of focus groups to collect information that would allow EBSA to see how well the disclosures required by ERISA section 408(b)(2) work, as well as to “evaluate whether, and how, a guide, summary, or similar tool would help fiduciaries understand the disclosures.”

The 11 groups that have replied to the ICR are challenging the need for a guide, as well as the length and timing of the comment period (which fell over the holiday season) and the script to be used for the focus groups. Concerns about the script include the potential for introducing bias by such things as the use of the term “hidden fees.” 

They also say that the guide regulation should not be issued until after the focus groups have been held and the results made public, and not issued at all unless testing reveals “substantive and compelling evidence of a need for changes.”

In addition, they are calling for the “release (of) a new proposal or (the) reopen(ing of) the comment period on (the) current proposal.”

The others in the group include the American Bankers Association, American Council of Life Insurers, ERISA Industry Committee, Financial Services Institute, Insured Retirement Institute, Investment Company Institute, Plan Sponsor Council of America, Securities Industry and Financial Markets Association, SPARK Institute and U.S. Chamber of Commerce.

— Check out The ERISA Mystery Part II: Model Portfolios in Participant-Directed Plans by Tom Giachetti on ThinkAdvisor.