Retirement plan service providers preparing for Senate fight on oversight

As the Senate begins debate this week on its version of a financial services reform bill, advisers and service providers working with retirement plans are trying to avert the possibility of coming under greater regulation by an existing or new government agency.

In the House reform bill passed last year, a last-minute language change added unregulated retirement plan providers to those who would fall under the jurisdiction of a new consumer financial protection agency.

Capitol Hill pundits believe that the CFPA probably won't be created, but they believe that the Senate bill could give a new or existing government agency increased authority over an array of financial services entities, including retirement plan providers that may or may not be regulated currently by the departments of Labor or Treasury.

“My concern is that my clients are already subject to significant regulatory overlap where agents from different regulatory bodies are coming into their offices asking for different things,” said Jason C. Roberts, a partner at Reish & Reicher, a law firm that represents securities firms and investment advisers. “There is a potential for huge confusion.”

That concern has led the American Society of Pension Professionals & Actuaries and the Investment Company Institute, among other groups are lobbying senators to exclude service providers and advisers serving the retirement plan market.

“Our concern is that having a third regulator thrown into the mix would be unnecessary and would add to the confusion and the expenses,” said Judy Miller, head of actuarial services at the ASPPA. “Just because it's not called the CFPA, if (this legislation) creates a new department in an existing agency other than Treasury or DOL, then we would have the same concerns.”

The last-minute change to the House bill came at the request of Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, as well as Labor and Treasury officials, according to those familiar with the situation, who asked not to be identified. Its goal is to address situations in which plan service providers elude regulation by either the Labor Department or Treasury Department, said a government official, who asked not be identified.

For example, retirement plan providers can market an affiliated institution's individual retirement account as a rollover opportunity for plan participants, the official said. Similarly, a service provider may market another financial institution's consumer loan services.

The House bill also covers regulatory gaps related to information sharing among service providers about plan participants' assets and income, the official said.

“I want to be sure that there is more clarity around what makes an adviser or service provider a 'non-regulated' entity,” Mr. Roberts said.

One area of contention the ASPPA is lobbying against is any new regulation of 401(k) plan record keepers.

The group, which represents 7,200 administrators and attorneys who work with 401(k) plans, has drawn up talking points and is meeting with members of the Senate, urging them to remove the House language from their bill.

Specifically, the ASPPA argues that the upcoming Labor Department guidance on 401(k) plan fee disclosure directly affects record keepers, said the ASPPA's Ms. Miller. Also, when the Labor Department audits 401(k) plans, it goes into the record keepers' offices, she said.

“If someone thinks there is a hole in regulation, we think they should fill it by providing whatever authority they think is missing to Labor and the Treasury.”

But Labor Department officials argue that they don't cover record keepers. “We don't have jurisdiction over record keepers; we have jurisdiction over plans,” said Gloria Della, a DOL spokeswoman.

Officials at the ICI also said they are busy working with members of Congress to exclude retirement service providers from regulation under a Senate bill.

So far, lobbyists against increased oversight of retirement services providers and advisers are hopeful. “The people that we have talked to in the Senate seem to be sympathetic, so we are hopeful,” Ms. Miller said.

Jessica Toonkel Marquez is a reporter at InvestmentNews, a sister publication of Pensions & Investments.