WASHINGTON — Chances are slim that fee limitations for investment advice to 401(k) participants could be relaxed by a Republican-controlled Congress this year, according to financial industry lobbyists and attorneys.
But if the Democrats take over either the House or Senate in November, those chances disappear.
"User-friendly technical corrections to the investment advice provisions would be more likely to occur in a Republican-controlled Congress," said Andrew Oringer, an ERISA attorney with Clifford Chance US LLP, New York.
"We would hope that a Democratic-controlled Congress would be more interested in protecting American workers' retirement savings than in creating opportunities for the mutual fund industry to exploit them," added Damon Silvers, associate general counsel for the AFL-CIO, Washington.
Money managers are concerned because the provision in the recently signed Pension Protection Act allowing them to give advice directly to 401(k) plan participants has a significant catch: It requires firms offering advice to charge a single flat fee, no matter what investment options the participants choose (Pensions & Investments, Sept. 18 ).
That provision, according to some lobbyists, substantially undermines the law's regulatory relief because managers usually charge much higher fees for some strategies than others.
To fix the provision, some investment management and insurance industry lobbyists have been trying to persuade lawmakers that pricing constraints were the result of a legislative drafting error, one that could be corrected with an amendment — perhaps as soon as Congress reconvenes for a lame-duck session after the elections. But a Democratic victory next month would kill that effort.
The insurance and mutual fund industries have been promoting a change in the provision to make clear that money management firms would be able to charge flexible fees as long as the compensation of the individual adviser representing the firm remained the same, regardless of the investment option picked by a plan participant.
But many ERISA attorneys said the so-called "fee-leveling" requirement had been the result of a hard-fought compromise among top congressional Republicans before President Bush signed the measure Aug. 17. So the plea for a deregulatory fix would be hard to get, even if Republicans retain control of the Senate and the House this year.