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Sponsors Fret Over DoL Regs

Plan sponsors worry that proposed regulations from the Department of Labor holding them responsible for understanding plan fees will cause confusion, administrative headaches and increase liability.

Plan sponsors worry that proposed regulations from the Department of Labor holding them responsible for understanding plan fees will cause confusion, administrative headaches and increase liability. The DoL proposal says nothing about how to test whether sponsors understand the fees they pay. Vendors have also said they are also concerned about liability, and one of their advocacy groups, the American Society of Pension Professionals and Actuaries, has already said the rules are nearly impossible to comply with because vendors aren't disclosing necessary information (DCSPA, 12/12). DoL spokeswoman Gloria Della said, "These regs have just been published and there is still a lot of thinking to do."

"It's all just about legality and liability," said Sherwin Kaplan, an attorney at Thelen Reid & Priest. "It should be the fiduciary's obligation to know how all the connections are made, even if it comes out of the plans assets." Kaplan added that plan sponsors would be required to understand "free" services provided to the plan and how those services are paid for.

But sponsors say that DoL shouldn't put the entire burden on them. Bryce Higgins, director of employee benefits of Southwest Airlines, said "I am hesitant to say if additional regulations that are necessary... The best way to improve transparency is to have service providers understand that plan sponsors are increasingly held liable for not understanding these fees." He added that competition should be able to fix this issue without regulatory interference because firms that don't disclose enough information for the sponsor to do his job will lose business. Southwest has $250 million in its 401(k) plan.

Allen Berry, treasurer of Wehco Media, said he would rather not see the DoL act on this issue. "This would only complicate things even more. I think the service providers are doing a fairly good job...A standardized method that addressed all the issues between parties is an easier fix." Wehco currently has $17 million in its 401(k) plan.

John Blossom, president of Alliance Benefit Group, also said the marketplace would help solve the problem. "If there was a clear method to give information to the plan sponsors, the marketplace will take care of the providers that are too expensive and charge too much. Providers will have an incentive to create more competitive priced because all the information will be out on the table for everyone to see."

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