Defined contribution plans will be the subject of intense scrutiny and proposed federal regulations over the coming months, speakers detailed at Pensions & Investments' West Coast Defined Contribution conference in San Francisco.
A sense of urgency was apparent from plan executives attending and speaking at the conference earlier this month, who said they were increasing automatic enrollment and financial education as part of efforts to restore faith in the 401(k) system and help rebuild account balances.
Their resolve was defined by the continuing reality that corporations are shifting away from defined benefit plans, increasingly leaving 401(k) plans as the sole retirement plan.
Changes in Washington won't be radical, said James M. Delaplane Jr., a partner with Davis & Harman LLP, Washington. “This is not an administration which is saying we have to pull the 401(k) system out by the roots and replace it with something else,'' said Mr. Delaplane, a keynote speaker who opened the conference.
Mr. Delaplane predicts changes will come exclusively from regulators, not Congress, in the next year. Legislators, he said, will be too busy with health-care reform, economic issues and the war effort.
But as regulators get ready to toughen rules on disclosure of mutual fund expenses, fees and investment advice, plan executives and service providers already are eying change.
Mr. Delaplane said a study from Hewitt Associates LLC found that 81% of large plan sponsors planned to review fund expenses and revenue sharing this year, while 73% expected to increase communications to participants on plan investments and fees.
The first set of proposed regulations should come by the end of the year, Mr. Delaplane said.
The Labor Department is also is expected to repropose rules – floated in the last days of the Bush administration and killed this year — that would have allowed wide latitude to financial firms in their ability to give investment advice to defined contribution plan participants. Mr. Delaplane said the new rules are expected put more restrictions on financial firms to give advice.