Industry heavyweight SPARK weighs in on 408(b)(2) fee disclosure reform. We take issue with their key point.
Recently, we responded to the DOL’s request for comments regarding a proposed amendment to ERISA Section 408(b)(2). While we disagree with the DOL’s “guide” proposal (we prefer the idea of a standardized summary of fees and services), we are generally enthusiastic about the DOL’s continuing efforts to reform service provider fee disclosure. The current disclosures are complex and confusing. We think it’s important to make the plan fiduciary’s job of understanding and comparing fees and services as simple as possible.
Like us, the Society of Professional Asset-Managers and Record Keepers (SPARK) responded to the DOL request for comments. SPARK is one of the largest professional associations serving our nation’s retirement plan industry. Their members serve over 70 million retirement plan participant nationwide. Unfortunately, I found SPARK’s 408(b)(2) reform comments disappointing.
In their comments, SPARK takes issue with the DOL’s proposed amendment. Not the amendment, but its underlying need. They assert the DOL failed to properly support the need for 408(b)(2) reform and to quantify its burden under Paperwork Reduction Act (yes, they really went there).
I can’t help but feel like that’s a dodge. Like the DOL, I have looked at numerous provider fee disclosures. With that experience, I can tell you I don’t need to see any more proof of a problem. Too many disclosure are simply way too complex.
SPARK asked for the reform process to be postponed until more data and factual evidence can be gathered. Or to use SPARK’s words, the “OMB Should Delay Reviewing the ICR until an Adequate Record is Developed.” Quite a mouthful.
If you are a small business 401k sponsor, you already recognize the problem. Even the DOL says the darn thing needs a table of contents.
While I respect SPARK’s keen technical understanding of the regulatory process, I think their comments neglect the key issue at hand - 408(b)(2) reform is necessary sooner rather than later.
Plan sponsors – especially small business owners - need simplification now, not later.
That’s why I am disappointed with the SPARK comments. I expected this influential group to use their comment opportunity to suggest solutions to an obvious problem. Instead, they are creating a potential issue that will lead to further delays. We can’t afford to lose even the small amount of traction for reform we currently have.
I would like to see follow-up comments from SPARK which make clear their position on 408(b)(2) reform. I hope they are for it.
About Greg Carpenter
Greg Carpenter founded Employee Fiduciary in 2004. With 29 years of experience in accounting and finance, Greg has brought his expertise to a variety of advisory, senior and executive management roles. Greg has worked for a national accounting firm, a Fortune 500 plan sponsor, a major brokerage firm, and he served as the CEO of a major 401k TPA firm. He is a CPA and earned his BA from Yale and his MBA from The University of Chicago Booth School of Business.