Mutual fund executives are slamming new fee-disclosure legislation — approved by the House on May 28 — on grounds that it could derail the Department of Labor's own long-pending efforts to set final fee-disclosure regulations for defined contribution plans.
Mutual fund industry representatives say they don't believe disclosure provisions — included as part of a last-minute addition to the American Jobs and Closing Tax Loopholes Act of 2010 — would be substantially more onerous than the pending DOL regulations. The provisions cover disclosure from service providers to plan sponsors, and from plan sponsors to participants.
But adoption of the bill would delay, for years, final resolution of the industry's DC plan fee-disclosure requirements, they say, an issue that many in the retirement industry would like to put to bed.
“Our concern is that it (the legislation) is just going to further delay comprehensive fee disclosure,” David Abbey, managing counsel and vice president of T. Rowe Price Associates Inc., Baltimore, said in an interview.
“The retirement community was looking forward to the certainty of final legal standards in this area after four or five years of deliberations,” noted James M. Delaplane Jr., an ERISA attorney at Davis & Harman LLP, Washington. “I think folks had hoped we had finished that process and we could move on.”
But others contend legislation is important because it would give the DOL regulations the force of law and would clarify the Labor Department's authority to require service providers to disclose fee information to plan sponsors. It also would — for the first time — require local and state government retirement plans, including non-ERISA 403(b) and participant-directed 457 plans, to comply with the DOL fee-disclosure regulations.
“We think there should be greater transparency here,” said David Certner, AARP legislative policy director, Washington. “Having greater disclosure will help drive fees down.”
A final DOL rule detailing all the fee and compensation information that service providers should be disclosing to plan sponsors had been scheduled to be published by the end of May.
A second rule, laying out what fee information plan sponsors should provide to plan participants, is scheduled for publication in September.
ERISA attorneys believe that DOL officials will put a hold on both rules at least until they see whether the legislation is enacted into law. (The House voted 215-204 to approve the jobs bill May 28. It now goes to the Senate, which returns to work from its Memorial Day recess on June 7.)
Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, had not returned telephone calls at deadline. Joseph De Wolk, a DOL spokesman, declined comment.
But some pension industry observers said it would have been more efficient for Rep. George Miller, D-Calif., and Rep. Richard Neal, D-Mass. — the two lawmakers promoting the fee-disclosure provisions — to drop their legislation and try to work with the Labor Department.
“Now that you've got a DOL that is led by your own people (Democrats), why wouldn't you work with those regulators to craft rules that strike the right balance, rather than imbedding possibly overbroad rules into the statute?” asked Andrew Oringer, an ERISA attorney with Ropes & Gray LLP, New York.
“If you get it (the legislation) wrong, you're embedding the wrong answers, which will then be extremely difficult to fix,” he said.