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Retirement Planning Industry Pushes For Leniency On Fee Disclosure

Reuters  |  Posted: 04/30/2012 2:26 pm



* Providers ask for one-year transition

* With two months left, firms fret

By Jessica Toonkel

NEW YORK, April 30 (Reuters) - The retirement planning industry is asking once again for leniency from federal fee disclosure regulations that take effect July 1.

The American Society of Pension Professionals and Actuaries (ASPPA) sent a letter to the U.S. Labor Department on Monday requesting a one-year transition period by which the agency would allow for "good faith efforts" by the service providers to comply with the regulations.

The Securities Industry and Financial Markets Association, the brokerage industry trade group, sent the department a similar letter on April 16.

The two groups, which represent thousands of financial advisers, are worried that even though the rule takes effect in 60 days, there are a lot of unknowns about the details, officials said.

The SPARK Institute, the trade group for retirement plan administrators, sent the Labor Department a similar letter in March. The American Bankers Association has also asked for a one-year transition period in conversations, said Tim Keehan, vice president and senior counsel of the ABA.

This is not the first time the industry is pushing back on the fee disclosure rules.

The Labor Department issued the current rule in July 2010 and gave providers 12 months to comply. After industry opposition, the department extended the deadline to April 2012. The final rule was released in February.

Under the rule, starting in July service providers will have to disclose all of their fees to retirement plan sponsors. In August, retirement plan sponsors will have to disclose their fees to plan participants.

Retirement plan advisers worry the rules require advisers to disclose historical performance and fees for model portfolios, which are customized managed accounts designed for specific plans.

The way the rules are written, it is unclear whether it is sufficient to just disclose the performance and fees of the funds that make up these model portfolios, said Craig Hoffman, general counsel of ASPPA. Trying to disclose the performance and fees of the actual model portfolios is "expensive and problematic," he said.

ASPPA's members have voiced concerns that regulators could construe the historical investment performance of their model portfolios "as misleading advertising," Hoffman said.

A one year "good faith transition period," would allow firms to try to comply with the new regulations with the promises that the agency will have "an understanding of the ambiguities present and take that into account," Hoffman said.

The agency could still enforce against poor practices, but any enforcement action "would be tempered with a more liberal application," he said.

A Labor Department spokesman declined to comment.

But the department seems to recognize these issues. Speaking at ASPPA's annual 401(k) conference in March, Michael Davis, deputy assistant secretary of the department's Employee Benefits Security Administration, said it would provide some answers that would address the industry's concerns about model portfolios "within weeks".

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