Once again, the head of the Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA), Phyllis Borzi, promised a re-proposal of a fiduciary rule for ERISA purposes. Borzi’s most recent statement came September 27, at a New England Employee Benefits Council conference. She also noted that EBSA plans include a proposal that would require employers to provide to their 401(k) (and other) pension plan participants lifetime monthly income illustrations. And she promised more guidance on fee disclosure rules.
Fiduciary Definition: On the fiduciary issue, Borzi, said “The regulation has been completely redrafted and refocused. It is much sharper and more targeted, and I think more effective and efficient.” She declined to speculate on the timing, saying, “I have no idea when it’s coming out.” She did say that the economic impact analysis is “nearly finished” and is “hundreds of pages long and based on peer-reviewed research.”
NAIFA anticipates serious problems with the new proposal. That anticipation comes from other comments Borzi and her colleagues have made, including this one made on September 27: “The amount of loss to savers from conflicted advice will knock your socks off. It is a very, very high number. We more than document the problem. No reasonable person can conclude that there is no problem.” Then she added, “You’ll see big amendments to prohibited transaction exemptions that had needed to be tweaked to come into line with the regulations we are proposing.”
NAIFA is a member of a coalition that is preparing to fight back on what is anticipated to be an adverse proposal. The public education and lobbying effort includes creative and humorous ways to communicate to retirement plan investors how the rule may limit their access to advisors and help. It is expected to get underway early in 2014, and will focus on the need that rank-and-file plan participants have for professional investment advice, and the potential that the new EBSA proposal would reduce access to advice by effectively eliminating the ability of commissioned advisors to provide help and assistance.
Lifetime Income Illustrations: Borzi also noted that EBSA is currently drafting a proposed rule that would require employers to include in 401(k) and other defined contribution (DC) plan participant benefit statements illustrations that show how much the account balance—currently and as they are projected to grow—would throw off in monthly income, for life. She said the proposed rule will track the ideas—illustrations showing monthly income from the current account balance, and also illustrations showing the monthly income from that balance as it would grow from interest income and potential increases in compensation— put forward in the advanced notice of proposed rulemaking released on May 7.
Borzi noted that EBSA has received 120 comments (including from NAIFA's) on the proposal, many suggesting that the illustrations be voluntary. She intimated that the proposed rule contemplates a mandatory set of illustrations. “I will say this,” she said. “It is voluntary under current law. I’m not sure we’ll move the need at all if we say you can do it if you want, you can do what you want.”
Fee Disclosure: Borzi also said that because DOL has received so many questions about its July 22 Field Assistance Bulletin (FAB 2013-02) on fee disclosure that the agency expects to issue more guidance “soon.” Specifically, the issue involves the FAB’s announcement that plan administrators may take a one-time opportunity to change their annual deadlines for distributing plan fee disclosure information to plan participants. She said the one-time opportunity applies to all fee disclosure guidance released to date.