Updated with correction
The Department of Labor has sent to the Federal Register a long-awaited rule detailing the fee and compensation information that service providers will be required to provide to sponsors of retirement plans.
But instead of putting the rule into immediate effect, the DOL has postponed the effective date until July 16, 2011, and has cast it as an “interim final” rule. The interim rule is expected to appear in Friday's Federal Register.
ERISA attorneys and lobbyists said the 2011 effective date is intended to give the industry time to prepare for the enhanced reporting obligations. The DOL cast the regulation as interim, the attorneys and lobbyists said, because it is providing the public with 45 days to comment after the rule appears in the Federal Register.
The full text of the regulation, as sent to the Federal Register, is available on the Register's website: http://frwebgate1.access.gpo.gov/cgi-bin/PDFgate.cgi?WAISdocID=AyRcB8/26/2/0&WAISaction=retrieve.
The regulations are intended to provide sponsors with information to ensure that plan service costs are reasonable. They also would require service providers to disclose whether they will be acting as fiduciaries to plans.
In addition, they would require broker-dealers and record keepers that provide unbundled services to DC plans to disclose to the fiduciary compensation information on all of the investment options for which they provide broker-dealer or record-keeping services.
Still another regulation would require bundled service providers to break out the record-keeping costs.
“Complete and consistent fee disclosure, including the specific requirement for the disclosure of fees associated with record-keeping services, is now the standard for both bundled and unbundled service providers,” Brian H. Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, said in a statement. “By promoting fair competition, these new fee disclosure requirements will help ensure that the fees paid by plan sponsors and participants for retirement plan services are reasonable.”
Rachel McTague, spokeswoman for the mutual fund industry's Investment Company Institute, said in an e-mail response to questions: “Although 401(k) disclosure reform will entail significant compliance costs for the industry, ICI has long supported DOL's efforts because it is crucial that plan fiduciaries have the information necessary to oversee their 401(k) plans and that plan participants receive key, comparable information about their investment choices. While we are still reviewing the new rules, we expect to work with our members and others in the retirement industry to implement them.”
In a statement, House Education and Labor Committee Chairman George Miller, D-Calif., vowed to continue trying to pass his legislation that includes more comprehensive 401(k) fee and compensation requirements.