A few weeks ago I mentioned in an article that there was a possibility that new Department of Labor 408(b)(2) regulations may be pushed back from their April 1, 2012 effective date. Two major organizations — the American Society of Pension Professionals & Actuaries (ASPPA) and the Council of Independent 401(k) Record keepers (CIKR) sent a request letter to the DOL asking it to push back the effective date for the new 401(k) fee disclosure regulations. Below are 3 articles that provide some insight into why these groups are asking for another extension. However, the fact of the matter is, there have been extensions and if these service providers were truly forthcoming about their fees, then it’s not so difficult to fathom what the DOL will require. In my opinion it’s another attempt for large firms to continue to take advantage of plan sponsors and ultimately plan participants who are still in the dark about the fees they pay in their 401k plan.
“Labor Dept. may delay 401(k) fee disclosure”, states that one reason for the delay is that the release of the final rule, on how providers will be required to disclose their fees to employers, has been delayed and not due to come out until the end of January. That would still leave all service providers, record keepers financial advisors and fund companies 2 months to comply. Industry lobbying groups such as the securities industry and Financial markets Association and the Investment Adviser Association seem to be splitting hairs when it comes to disclosure. The bottom line is if you have nothing to hide and you’ve been upfront with the client then it shouldn’t be so difficult to provide a summary disclosure of all fees associated with the plan on top of the actual fee disclosures, which seems to be the main reason industry lobbyists are looking for an extension.
In the article, “Report of a possible delay in DOL’s fee disclosure rule sparks apprehension among advisors and industry observers”, the point is made that many companies oppose the rule. Of course they do when these companies have been able to swindle millions in excessive fees at the expense of plan participants. Terrence Morgan who manages smaller 401k plans inOklahomastates, “It’s a tragedy this may be delayed. This is a tragedy for the marketplace and every participant inAmericathat it can’t happen sooner. I think there’s a lot of back-room pressure.” Remember, this is an election year!
Lastly, “DOL to AdvisorOne: Department ‘Has Not Signaled’ Extension of April 1 Fee Disclosure Deadline”, again mentions the fact that ASPPA, the American Society of Pension Professionals and Actuaries, is pushing to have the effective date for the fee disclosure regulations to be “no earlier than one year after the 408(b) (2) regulation is published in final form”.
If an extension is granted the only people who benefit are the service providers who persist in using asset-based fee charges, bundled products, revenue sharing, etc. instead of a platform of transparency and hard-dollar fees. As a plan participant, you have a right to know what your 401k plan costs. When 72 million plan participants do become aware of what they actually pay for their plan, business owners, plan sponsors, benefits committees and trustees who are now prepared will risk DOL and IRS fines as well as possible employee class-action suits. “Time is money” and the only question that remains is whose money is at stake. Unfortunately it will be the plan participants who will pay if another extension is granted.