The Bush administration's failure to win final approval of new fee disclosure regulations for defined contribution plans could turn into a major headache for executives.
That's because existing Department of Labor regulations require them to report fee and compensation information they might not be able to get, ERISA attorneys and pension industry consultants said.
The Department of Labor in 2007 adopted new annual fee-and-compensation reporting obligations for DC plans. Plans are supposed to start supplying the Department of Labor with the information — including the obscure revenue-sharing arrangements that plan service providers use to divvy up plan fees among themselves — in their annual Form 5500 financial reports, starting with the 2009 plan year.
The rub for sponsors is that they have to get much of the fee and compensation information required for those reports from service providers. But there's no legal requirement for the providers to release that information.
The DOL under the Bush administration had proposed a new rule that would have required service providers to give plan executives the necessary information. But that proposal was not approved before the Obama administration took over Jan. 20 — and it's unclear what will happen to it.
“Now we have requirements for what plan sponsors have to report to the government, but we don't have any regulations laying out the information that plan providers have to give to the plan sponsors,” said Ann Combs, principal for the strategic retirement consulting group at The Vanguard Group, Malvern, Pa., and a former assistant secretary of labor and head of the Employee Benefits Security Administration.
Some ERISA attorneys and pension consultants said that executives at large DC plans are likely to get much of the information necessary to fill out the enhanced Form 5500s — the first of which are to be filed in July 2010 — because many plan service providers will want to keep their customers happy.
“Service providers provide the information needed to file 5500s and they'll continue to do that,” said Ed Ferrigno, vice president of Washington affairs for the Profit Sharing/401(k) Council of America, Chicago.
Still, it's unclear how many service providers will reconfigure their internal reporting systems to collect detailed fee and compensation information until final regulations on the subject have been adopted.