Sometimes, it's the cure that can kill you, especially if the dosage is all wrong.
The Department of Labor – unswerving in its commitment to address any and all wrongs, perceived or otherwise – is thinking about making a change to 408(b)(2) disclosure requirements that has the ERISA Industry Committee justifiably alarmed.
The change would force insurance companies and other retirement plan service providers – including some advisors – to distribute a guide or similar tool to ensure fiduciaries really, truly, fully understand what's being disclosed to them.
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That doesn't sound like a bad thing, at least on its face, especially when it comes to sometimes questionable service fees. But there are some important facts to consider here that leave me with that old "mountain out of a molehill" feeling.
ERIC certainly thinks so and it isn't alone in its concern. The Spark Institute, American Council of Life Insurers and the Retirement Advisor Council, among others, have written letters to DOL we can only hope get read carefully.
The problem, in a nutshell, is that the regulators think everyone – small plans as well as large – needs help.
And that's where things veer sharply into the Overzealous Regulatory Zone.
As others with a stake in this question have pointed out, fiduciaries of plans sponsored by the nation's largest employers already have plenty of help whenever they need it.
Smaller plan sponsors, on the other hand, typically don't.
"ERIC is concerned that the DOL's focus on small plans may cause it to assume that similar issues exist for large plans," Kathryn Ricard, ERIC's senior vice president for retirement policy, said in a letter to the Labor department.
ERIC says a guide would, naturally, cost money, an expense that would likely be borne by a plan's participants. The other possible consequence: the energy wasted on guides diverts service providers' attention from more critical issues.
Will DOL listen? I hope so, because without clear evidence of a problem, then what we're dealing with here is (yet again) regulatory overkill.
And in the end, the DOL's idea of what might be the right prescription could just make things worse.
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