Prospects for legislation enhancing 401(k) plan fee-disclosure requirements remain murky because House and Senate Democrats — along with service providers — are at loggerheads over the issue.
The crux of the debate is whether House legislation that includes fee-disclosure provisions for service providers should be approved. Mutual fund executives want lawmakers to drop the legislation and let the Department of Labor set the new disclosure rules on its own. Some Senate leaders appear to be siding with the mutual fund industry.
But others argue that the legislation is needed to give teeth to any new disclosure regulations — and to ensure that they apply to providers not now subject to DOL oversight authority.
The controversy is largely focused on how best to ensure that providers disclose to plan sponsors enough information on fees and compensation to ensure that plan sponsors can prudently select service providers.
A final Labor Department regulation on the subject had been scheduled to be published by the end of May. A second DOL rule, laying out what fee information plan sponsors should provide to plan participants, is scheduled for publication in September.
“We are strongly supporting the legislation,” said Alison Borland, retirement strategy leader at Hewitt Associates LLC, Lincolnshire, Ill.
“It's not a slam-dunk at all that the regulatory approach is the way to go,” added Ed Ferrigno, vice president of Washington affairs, Profit Sharing/401(k) Council of America, Chicago. The (fee-disclosure legislation) bill has come a long way, and it's a viable alternative to the regulatory approach.”
Mutual fund executives have been slamming the need for fee-disclosure legislation, partly on grounds that it could derail the Department of Labor's own long-pending efforts to set final fee-disclosure regulations for DC plans (Pensions & Investments, May 31).
The legislative forecast is unclear, because a pending jobs bill, approved by the House May 28, includes fee-disclosure provisions. But the Senate's version of the American Jobs and Closing Tax Loopholes Act of 2010 unveiled on June 8 and expected to be voted on as soon as this week,excludes the fee-disclosure provisions.
At deadline, representatives for Senate Finance Committee Chairman Max Baucus, D-Mont., sponsor of the Senate version of the jobs bill, had not returned telephone calls seeking an explanation on why fee disclosure was excluded.
But House Education and Labor Committee Chairman George Miller, D-Calif., a strong proponent of the legislation, vowed to fight to ensure that fee disclosure is included in the compromise jobs bill.
“It is unacceptable for the Senate (to) eliminate this key consumer protection for 50 million Americans who have 401(k) plans,” said Mr. Miller in an e-mail response to questions. “We are going to continue to fight to put back these key reforms in this bill.”