The DOL comes down from the mountain

For some reason whenever I hear there is an appearance by a Department of Labor official at an American Society of Pension Professionals and Actuaries (ASPPA), I think of Charlton Heston coming down as Moses with the Ten Commandments. I don’t know why, but I always anticipate some pearls of wisdom or some clues as to what the DOL will do next.

DOL Deputy Secretary Michael Davis spoke at ASPPA’s 401(k) Summit in New Orleans this week and said some things that we already knew and said some things that we didn’t. He said a lot of things, but he said nothing. That view is usually from the belief that I only care what a governmental agency will do until they actually do it.

Davis indicated that the DOL will eventually revisit the change in the fiduciary rule at some point. There may be a delay in implementing it because the DOL wants to get it right (that’s a relief, as opposed to them wanting to get it wrong). At the same time they will unveil the new regulation, they will unveil some prohibited transaction exemptions to complement this rule, namely dealing with 12(b)(1) fees and revenue sharing.

Again, I say the fiduciary rule was inevitable with the delay in the implementation of the fee disclosure regulations, as well as the investment advice rule to plan participants that was implemented in December. Transparency and accountability is the way the DOL has been heading in the retirement plan business for quite some time.

Davis also indicated the DOL’s concern with open multiple employer plans (MEPs). The DOL is concerned with open MEPs that can be abusive arrangements and they should be because their role is to protect plan participants. From my experience with open MEPs, if you pick the wrong providers, they can be disasters and believe me, I have seen one of these disasters up close. The guidance set forth by the Internal Revenue Code and the Treasury Regulations is pretty thin. Yet the DOL by itself has no power to change the rules concerning MEPs and who can serve as a plan sponsor.

Open MEPs can be an attractive and affordable way for small employer to offer a 401(k) plan to their employees. MEPs can increase retirement plan coverage and there has been a push on Capitol Hill to support it. So while some open MEP chicken littles think the sky is falling, it would be unpopular for the DOL to torpedo open MEPs.

So I await the DOL’s action in these areas because everything else is just conjecture.

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