Experts Offer Take on Regulatory Uncertainties

A panel of experts at the Plan Sponsor Council of America’s annual conference in Scottsdale, AZ, on May 1 offered their take on some of the critical issues and uncertainties facing retirement plans, plan sponsors and the professionals who serve them, as well as the influence of the federal government.

“You ignore Washington at your own peril,” warned PSCA Executive Director Jack Towarnicky, capturing the tenor of a time in which regulations are introduced, percolate, are moribund and resurrect. It may seem no one’s looking closely, but nothing’s stopping the government from action that could have significant effects, he added.

DOL Fiduciary Rule

The Department of Labor’s fiduciary rule is a prime example. “I’d say it’s all about making a level playing field in the end,” David Levine, Principal, Groom Law Group, remarked, but he indicated that there is a backdrop of uncertainty. For instance, Levine said, for plan sponsors the question concerning the rule is: “What do they do now?” Not only that, the question arises regarding how plans are to be run while knowing that the model may change and since they have agreed to provide services but the rules may change. They must consider whether these rules apply, he noted.

Steve McCaffrey, Immediate Past Chair of the PSCA Board and head of the organization’s legal and legislative affairs committee, struck a similar tone. Some recordkeepers have agreed to be fiduciaries, and we’ll “have to see where that goes,” he remarked. Levine added that small plans may not have the resources to conduct monitoring that bigger plans do. “Committee meetings will be interesting in the next year,” he said.

ESG Guidance

Regarding the Labor Department’s recent Field Assistance Bulletin on considering environmental, social and governance (ESG) factors in plan design and management, Levine said things remain nebulous. “There is no real, clear definition of ESG,” he said, expressing the view that ESG is “another example of where people may play it safe.” PSCA Board Chairman Ken Raskin said he thought it possible that the guidance “could make it less likely that people will invest in them” and that it “made it potentially more difficult to choose one.”

And it may be a discussion a bit ahead of its time, panelists indicated. PSCA Director of Research and Communications Hattie Green noted that in PSCA research, just 2.4% of plans have ESG funds in their lineups. “It’s something we’re talking about but plan sponsors are not there yet,” said Green. “It’s too early yet,” McCaffrey agreed, but he added that he expects it will grow in time.

Missing Participants

Uncertainty swirls around missing participants as well; for plans that that have them and regarding federal guidance. But Levine believes regulatory relief may be on the way, remarking “I think it’s going to come.” The DOL is driving this right now,” he said, but the IRS and Pension Benefit Guaranty Corporation “are lining up now” as well. “It becoming a real issue for recordkeepers and plan sponsors,” Levine said.

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