On a semi-annual basis, the Department of Labor publishes a work plan for the guidance they intend to issue in the coming months. The plan is just that, a “plan.” There are no guarantees that the timetables and even the regulatory initiatives might not change during the year. Nevertheless, these pronouncements provide real insight into the DOL’s priorities. The plan also sets the stage for the NAPA Government Affairs Committee, which will be charged with responding to these proposals and providing input and advocacy on behalf of NAPA’s members.
The most recent edition of the guidance plan was released late last year. It includes a mixture of old and new initiatives that will be of great interest to plan advisors. Let's take a look.
Disclosure Guide
The first piece of guidance, which was expected in January, is a proposed regulation that may mandate that a summary or guide accompany the disclosures that are required under ERISA Section 408(b)(2). These rules took effect in July 2012. In general terms, they require certain advisors and other service providers to provide plan fiduciaries with information regarding the services being offered and the compensation being received. The big question mark is whether the guide will be required to include a “roadmap” that lists the page and section number in the supporting documents where the underlying data may be found.
‘Conflicted Advice' Reproposal
Another item on the guidance plan that will surely be of interest to plan advisors is the long awaited reproposal of the investment advice regulation. This proposal, which the DOL is now referring to as the “conflicted advice” regulation, was expected last year. The guidance plan now indicates it should be released in August. DOL officials have indicated that the regulatory proposal has taken longer than expected, but that progress is being made.
Self Directed Brokerage Accounts
A new regulatory initiative in the guidance plan will be of keen interest to advisors who work with plans that offer participants self directed brokerage accounts. In April, the DOL is expected to issue a “Request for Information” with respect to how these accounts are made available to participants and how they are used.
The DOL’s interest in self directed brokerage accounts first became apparent with the release of a Field Assistance Bulletin (FAB 2012-02) issued in May 2012. The FAB consisted of a number of questions and answers that DOL prepared to assist plan sponsors in meeting their participant disclosure obligations. In what came to be known as the infamous “FAQ 30,” the DOL indicated that it might be a fiduciary violation for a plan to offer only self directed brokerage accounts without any specific designated investment alternatives. FAQ 30 also suggested that plan fiduciaries may have an obligation to monitor and review investments being selected by participants through a brokerage window even though the investment had not been specifically designated by the plan.
FAQ 30 created such a controversy that the DOL, in a subsequent re-release and revision of the FAB (FAB 2012-02R), withdrew it. In its place, a new FAQ 39 was added. The new question backed off from the controversial positions in the original. The DOL indicated, however, that plan fiduciaries may nevertheless have duties under ERISA in connection with these types of arrangements. The revised FAB specifically indicated that the DOL intended “to engage in discussions with interested parties to help determine how best to assure compliance with these duties in a practical and cost effective manner, including, if appropriate, through amendments of relevant regulatory provisions.” It seems that the RFI will be the first step in this process.
Participant Benefit Statements
Also on the guidance plan for the first time: proposed regulations regarding participant benefit statements. This proposal, which is due out in August, is expected to include provisions that would require a projected lifetime income estimate based on the participant’s account balance be included on 401(k) plan benefit statements.
TDF and Other Fund Disclosures
In March, the DOL is planning to issue final regulations regarding additional disclosures to participants who are offered target date, lifestyle or similar types of funds as designated investments. Proposed regulations were issued in the fall of 2010 that would require a clearer description of a target date fund’s glide path, among other things.
Craig Hoffman is ASPPA’s General Counsel and Director of Regulatory Affairs.
