ASPPA convention addresses compliance, DOL relations

The pending implementation of the Department of Labor's new rules on fee disclosure was one of several topics that had hundreds of financial advisers, consultants, fiduciaries, IRA experts and record keepers gathered in the Big Easy, at the American Society of Pension Professionals and Actuaries 401(k) Summit buzzing with nervous anticipation.

At the event, held March 18-20 in New Orleans, ASPPA CEO Brian Graff moderated a session with Michael Davis, deputy assistant secretary of the Employee Benefits Security Administration at the Labor Department, to help answer questions that concern those in the retirement space.

 

Electronic versus paper

Although the 408(b)(2) disclosures have to be out to clients by July 1, participant fee disclosures are required by the end of November 2012. There are two main concerns advisers have when dealing with the disclosures: How can I reach the most clients, and how can I do so in the cheapest form possible?

One adviser shared with Graff that a client with 20,000 remote employees will have to pay $50,000 to send paper disclosures each year - a cost that is too high, industry experts say.

ASPPA has commented on this in the past and Graff reported that the DOL will receive an industry letter from 15 organizations, including ASPPA, that are very concerned about the cost that will be picked up by participants unless a safe harbor can be met that will allow for electronic rather than paper delivery.

Davis noted he understands the frustration surrounding the electronic versus paper delivery, but what industry professionals don't realize, he said, is that departments have to balance a variety of different constituents and their interests. Although the DOL recognizes the interest in electronic disclosure, Davis pointed out that those who are most interested in their retirement now are nearing their actual retirement, and that population tends to be one that is not as electronically savvy, in most cases.

 

Ready or not

In her Summit session, Atlanta attorney Ilene H. Ferenczy focused on current issues and upcoming hot topics surrounding the regulatory landscape and what financial professionals can expect in the upcoming months.

"On July 1 the No. 1 thing that's going to be on both the DOL and the IRS' audit list is going to be [to] ask for all the service provider fee disclosure information," she said. "And if you don't have it they're going to be looking to enforce it. I think they're pretty serious about this stuff."

Ferenczy said the final regulations make it clear that if financial professionals can't do a calculation of what their fee expectations are that they can use a good faith estimate, as long as the client is told upfront both that it's an estimate and also the assumptions on which the estimate is based.

One "overwhelming thing" surrounding the regulations Ferenczy thought advisers should keep in mind is that the DOL's goal with the regulations is to give clients the information that they need to make a choice between service providers and to understand what they're paying. "Anything you do to get them [a proper disclosure] will be reasonably acceptable," she added. Advisers must make sure disclosures and agreements are up to date with the forward-looking 408(b)(2) final regulations. Financial professionals have to give their proper disclosure within 90 days, she added.

 

New advocacy group

The National Association of Plan Advisors, a sister organization to ASPPA, was formed less than six months ago and has already grown to 3,000 members, said Marcy Supovitz, president of NAPA, at the conference. NAPA was created for and is led by retirement plan advisers; its primary purpose to represent advisers in Washington.

"Over the past decade or so the plan adviser role really has become a distinct profession and one that is very different than what other financial advisers do," said Supovitz.

 

Organization honors agency

ASPPA and Morningstar awarded financial professional Donald Stone the 401(k) Advisor Leadership Award at the Summit, the most revered honor for advisers serving in the retirement industry.

Stone is the managing director and CIO for Chicago-based Plan Sponsor Advisors.

"We're very excited to have won. It means a lot to us; it's great recognition because of all the work our team has done," he said. "We think the retirement industry is one of the most important areas in the American business world because we're helping plan participants actually have better outcomes for retirement so they can retire with dignity."

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