In a rather quick turnaround, the Department of Labor has withdrawn a final regulation previously published on Inauguration Day concerning who may provide investment advice to qualified retirement plan participants.  Previously, the new Administration had twice pushed back the effective date of those final regs until November 18, 2009 and then May 17, 2010  in order to receive more public comment on them.

The Pension Protection Act of 2006 (PPA) had developed a somewhat broad set of conditions under which individuals and entities could provide specific investment advice (as opposed to general investment education) to plan participants.  The PPA then authorized the DOL to issue regulations with greater levels of detail on what was permissible.

In the last days of the Bush Administration, the DOL issued those rules, which some in Congress took to be overly lenient.  One House Committee Chairman, George Miller (D-CA) passed a bill through his Committee that would have severely restricted those final regulations and required (among other things) increased independence of any financial adviser offering investment advice to participants.  The DOL postponed the effective date of the final regulations in order to receive additional public comment and to work with Congress on what was intended by the PPA.

On November 17, 2009, the DOL announced that it was withdrawing the final regulation altogether.  We now expect that it will begin its rulemaking process anew with the data collected from the previous public comments.

Plan sponsors will now need to review the DOL’s withdrawal of the final regulations and wait to see what the new requirements will be before safely assuming who may provide such investment advice to participants.

In a much anticipated move, the US Department of Labor is expected to issue a Proposed Regulation sometime this Spring on qualified retirement plans (including 401(k) plans) requiring investment and service providers to disclose information concerning direct and indirect compensation, fees and other financial arrangements.

The additional fee and expense information is intended to help plan sponsors make informed choices among providers. The proposed changes will “make it easier for regulators and plan officials to ensure workers’ interests are protected,” says Acting Assistant Secretary of Labor Bradford Campbell.

Campbell has called fee transparency “a top priority” for the DOL.

For the benefit of both plan participants and plan sponsors, let’s hope that the Proposed Regulation has a broad reach.

Yet another good article on the need for plan sponsors to insist on full fee disclosure as part of performing their fiduciary obligations under qualified retirement plans. For article, click here and here (free one-time registration required).