WASHINGTON — The Department of Labor's announcement that it is planning to implement new fee-disclosure regulations for participant-directed defined contribution plans beginning on or after Jan. 1, 2009, was met with skepticism by pension industry consultants and lobbyists — even though the proposed rule itself generally received favorable reviews.
“The effective date is obviously problematic,” said Ed Ferrigno, vice president of Washington affairs for the Profit Sharing/ 401(k) Council of America, Chicago.
“I don't think it is realistic,” added Alec Dike, a senior consultant for Watson Wyatt Worldwide Inc., Arlington, Va.
The DOL's proposed rule, published in the Federal Register July 23, is intended to ensure that participants in 401(k) plans and other participant-directed DC plans receive uniform and useful fee and expense information about their investment options.
Key information that plan fiduciaries would have to provide about plan investment options under the proposed rule would include fees and expenses, past performance data, a comparable benchmark return and a website address for participants seeking more detailed information about the investment option than required by the rule.
The information, which is supposed to be presented in a format that makes it easy for plan participants to compare investment options, would have to be given to participants annually and to new participants when they first become eligible to participate in a plan.
In addition, the proposed rule would require plan fiduciaries to disclose to participants quarterly the dollar amounts charged to the participants' accounts during the preceding quarter for plan-level administrative expenses.
“It keeps it simple and limits it to fees actually paid by the participant,” said Mr. Ferrigno.
But pension industry lobbyists said it unlikely that the DOL will be able to publish its final rules before the end of the year, because the comment period doesn't end until Sept. 8.
Under the DOL's standard operating procedures, comments on proposed regulations must be reviewed before a final rule can be published. This review process can take months, sometimes stretching into more than a year. In addition, any rule the DOL creates after its review process has to be vetted for economic impact by the White House's Office of Management and Budget — a process that can take several additional months.