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| Tuesday, February 9, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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February 23, 2009 12:01 AM ET
John Bogle, founder of the Vanguard Group, testified at the House hearing. (Bloomberg)
One weakness the committee will eventually have to address: the Bush administration’s failure to win final approval of new fee disclosure regulations for defined contribution plans. That failure, say industry experts, could well turn into a major headache for corporate executives. That’s because existing Department of Labor regulations require them to report fee and compensation information they might not be able to get, ERISA attorneys and pension industry consultants said. The Department of Labor in 2007 adopted new annual fee-and-compensation reporting obligations for DC plans. Plans are supposed to start supplying the Department of Labor with the information—including the obscure revenue-sharing arrangements where plan service providers use to divvy up plan fees among themselves—in their annual Form 5500 financial reports, starting with the 2009 plan year. The rub for sponsors is that they have to get much of the fee and compensation information required for those reports from service providers. But there’s no legal requirement for the providers to release that information. The DOL under the Bush administration had proposed a new rule that would have required service providers to give plan executives the necessary information. But that proposal was not approved before the Obama administration took over Jan. 20—and it’s unclear what will happen to it. “Now we have requirements for what plan sponsors have to report to the government, but we don’t have any regulations laying out the information that plan providers have to give to the plan sponsors,” said Ann Combs, principal for the strategic retirement consulting group at The Vanguard Group—and a former assistant secretary of labor and head of the Employee Benefits Security Administration. Some ERISA attorneys and pension consultants said that executives at large DC plans are likely to get much of the information necessary to fill out the enhanced Form 5500s—the first of which are to be filed in July 2010—because many plan service providers will want to keep their customers happy. “Service providers provide the information needed to file 5500s and they’ll continue to do that,” said Ed Ferrigno, vice president of Washington affairs for the Profit Sharing/401(k) Council of America, Chicago. Still, it’s unclear how many service providers will reconfigure their internal reporting systems to collect detailed fee and compensation information until final regulations on the subject have been adopted. “It doesn’t make sense to the vendors to build these final systems now, because we don’t know what the final terms are,” said Kyle Brown, retirement counsel at Watson Wyatt Worldwide, Arlington, Va. Some ERISA attorneys said plan executives might have some leverage over service providers, because there’s also a requirement in the new Form 5500 that plan executives identify service providers who don’t cooperate. “Service providers aren’t going to want to be identified as being non-compliant,” said Jason Bortz, an ERISA attorney for the law firm Davis & Harman LLP, Washington. Yet others said there may be little the Department of Labor can do to punish service providers reported as non-compliant on the 5500s. “It’s not really clear what the Labor Department is going to do with this information,” said Amy N. Moore, a partner and chair of the employee benefits and executive compensation practice at the law firm Covington & Burling LLP, Washington. “They (DOL) really don’t have an easy way to penalize the service provider because there is no specific requirement today that the service provider provide this information,” Ms. Moore said. Despite the lack of any legal obligation to do so, Vanguard’s Ms. Combs said her firm will provide clients with the fee and compensation information they need to fill out their Form 5500s and set up the systems necessary to provide that information. One alternative is for the DOL to postpone the effective date of the reporting requirements until the agency comes up with final fee disclosure regulations for service providers. But since the Obama administration’s DOL team has yet to be installed at the agency, it’s unclear what will happen with the regulations now. “There could be significant changes,” said Jan Jacobson, senior counsel, retirement policy, American Benefits Council, Washington. In a telephone interview, Bradford Campbell, who stepped down as assistant secretary of labor and head of the EBSA on Jan. 20, said that while the new administration’s EBSA could simply throw out the proposed fee disclosure regulations, he believed it would be hard for the new team to justify jettisoning the proposals altogether. “The record of the regulatory process very clearly supported the thrust of our proposals, and major departures from those policies would be difficult to justify from the record,” Mr. Campbell said. Added Andrew Oringer, an ERISA attorney at the law firm White & Case: “When the administration takes a look at the hard work that the Department of Labor has done to date (on the proposed rules), it would not surprise me if they did not feel it necessary to reinvent the wheel.”
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