A new consumer protection agency created by the financial reform legislation will be able to regulate services that record keepers, investment consultants and other administrative services provide to defined benefit and defined contribution plans.
But exactly how much authority the new agency — the Consumer Financial Protection Bureau — will have over the service providers won't be clear until lawmakers release the fine print of the deal they cut over financial reform legislation in the early hours of June 25, lobbyists said.
The final wording of the legislative deal, which was expected to be released as early as June 26, was still being drafted at deadline.
The final conference agreement between House and Senate leaders also cleared the way for pension plans to continue using swaps to hedge plan risks, according to lobbyists.
“We're pleased the conferees recognized that plans use swaps to mitigate risks and the end result (of the legislation) is good for plans and participants,” said Judy Schub, managing director of the Committee on Investment of Employee Benefit Assets, Bethesda, Md.
The regulatory reach of the CFPB has been an issue because the House and Senate each approved separate versions of financial regulatory reform that gave the new agency different levels of authority over plan service providers.
Under the deal adopted by House and Senate conferees, the CFPB would be a bureau within the Federal Reserve system.
Pension lobbyists said the CFPB, under the conference agreement, would be able to regulate specific services provided to plans if authorized jointly by the Labor and Treasury departments.
CFPB also would have the ability to seek DOL and Treasury authorization to regulate specific services, although lobbyists said it's unclear exactly how this would work.
“I know for sure DOL and Treasury can ask CFPB to regulate,” said Brian H. Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, Arlington, Va. “It appears that the CFPB can also ask for permission from DOL and Treasury to regulate specific services as well. We really have no idea how exactly this is going to work at this point.”
Mr. Graff also said the ASPPA was trying to get clarification of the specific services that would be subject to CFPB regulation. “We doubt it means CFPB is going to regulate how to fill out Form 5500s,” Mr. Graff said. “But it would be good to get language clarifying that.”
Mr. Graff said the ASPPA would have preferred that the lawmakers had simply exempted record keepers and other administrative services from CFPB oversight entirely. “They're not consumer financial products,” he said.
But he added that requiring DOL and Treasury to sign off on CFPB regulations was better than giving the new agency blanket authority over plan service providers. “It's going to be a much more deliberative process,” he said.
The continued ability of pension funds to enter into swaps and other derivatives has been an issue because the Senate's version of financial industry reform would have banned plan use of swaps entirely, according to pension industry lobbyists (Pensions & Investments, May 3).