Emboldened by the certainty of four more years, the Obama administration in general and EBSA in particular are expected to extend and more vigorously enforce the agenda and regulations promulgated in the president’s first term. For example, legal experts predict that improper receipt of undisclosed 12b-1 fees by plan advisors will be the subject of increased enforcement. And although EBSA has indicated that good faith efforts to comply with the new fee disclosure rules will be considered, now that those rules have become part of the retirement plan landscape, look for less forgiveness from regulators.
Experts recommend that advisors spend the rest of the year carefully reviewing their service agreements to make sure that all payments are disclosed and determine whether they are acting as a fiduciary. While only a few settlements for undisclosed fees have come to light, there is probably much more enforcement activity brewing. Many questions remain. For example, compensation that an advisor receives while acting as a fiduciary must be levelized, but does that include money market funds? Will service providers offering proprietary funds that earn them greater revenue sharing become a target? Should a plan professional disclose compensation received from a provider which does not come out of the plan the professional serves? Welcome to the new world.
