Impatient waiting for the final word from the Department of Labor, some service providers are sending fee-disclosure information to clients in advance of the DOL's issuing formal regulations.
Providers say they are acting now because they want their clients to get a head start on understanding what they anticipate will be the new requirements under Section 408(b)(2) of the Employee Retirement Income Security Act. They say they're willing to risk revising their disclosure documents if the information required by the Labor Department differs from what they are providing, either in substance or in presentation.
“It's important to get out in front to educate sponsors, advisers and intermediaries,” said Charles Nelson, president of Great-West Retirement Services, Greenwood Village, Colo., whose firm began sending fee-disclosure documents in August to advisers and intermediaries. “You cannot just throw a document at them. You have to educate them.”
Some providers say their existing fee-disclosure documents offer more information than they expect will be required by the new DOL rules, adding that their firms probably won't have to make significant adjustments in their fee disclosure.
“We have been surprised at the level of discomfort in the industry,” said Lynda Abend, managing director of product development for New York Life Retirement Plan Services, Westwood, Mass. “Our clients know what they're paying for.”
The providers' responses mark the latest chapter in a long-running saga involving changes to Section 408(b)(2). The DOL issued proposed regulations in late 2007, but they were met by heavy criticism from many who provide retirement investment advice, management or services.
The DOL issued a new set of proposals in July 2010, calling it an “interim final” regulation and asking industry members for comments (Pensions & Investments, Oct. 1, 2010).