Representative George Miller on a Mission, Panel Reports

Advisers can count on new regulations relating to retirement plan fees and disclosures in the near future but it is unclear whether those will be authored by Congress or the regulators.

In Congress, U.S. Representative George Miller of California is driving a campaign focusing on 401(k) fees being driven by four main factors, according to Bridget Flynn Hagan, Senior Director of Government Relations at Nationwide: having the Democrats, who are being very aggressive in oversight of the Bush administration, in control of both houses of Congress; the recent Government Accountability Office report on plan fee disclosure; the recent litigation in this space, specifically the wave of suits filed by St. Louis law firm Schlicter, Bogard & Denton; and increased media reports.

As the chair of the House Education and Labor Committee, Miller has held hearings to discuss the issue and seems to be focusing most on participant level disclosures, Hagan said, speaking on a panel at PLANSPONSOR’s Plan Designs conference. She predicted that disclosures to the participant could become very specific and personal. Anticipating that Miller is going to soon be presenting a bill mandating new disclosures to participants, Hagan predicted that because Miller has a close relationship with Democratic House Speaker Nancy Pelosi, such a bill passing through the House seems likely.

It isn’t as clear whether the Senate will also be able to also pass a bill regarding fees although it might hold hearings in the fall she said. However, if there is a resulting bill, Hagan predicted that it likely will be more generalized and deal with investment fees on a broader level.

Focus on Revenue Sharing

If nothing else, attorney Steve Saxon, Principal with Groom Law in Washington, D.C., said, the lawsuits filed by the Schlicter firm did create enough interest that the industry is now presented with a unique situation in which Congress, the courts, and the regulatory bodies are all focusing on the same thing.

In his opinion, Saxon said, revenue sharing is under attack. However, Sherwin Kaplan, Council, Thelen, Reid, Brown, Raysman & Steiner, LLP, disagreed, saying he does not think that revenue sharing specifically is under attack but that instead, the focus will be on general disclosures, even disclosures in situations where such notifications are nearly impossible.

Further, the Department of Labor (DoL) is not waiting for Congress, Kaplan asserted, saying the regulator is taking initiative on its own on the 408(b)(2) project, focusing on what a plan fiduciary know before entering a relationship with a service provider.

Kaplan said there are two questions that must be asked of every service provider: first, please tell me all sources of income you will be receiving from any party as a result of my business and second, tell me all payments you will be making to any party as a result of my business. These answers should be delivered in writing and the plan sponsors should keep these answers for a record, he said.

Beyond Disclosures

Miller is also looking beyond just disclosure, Saxon commented, saying that Miller is also reported to be considering proposing a radical revamping of permitted retirement plan investments in large measure restricted to traditionally less expensive index offerings- “just real cheap investment funds.”

“If it gets through,” Saxon said, “that would be a big deal.”