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URGENT/IMMEDIATE ACTION REQUESTED
[20154]
July 5, 2006
TO: PENSION COMMITTEE No. 23-06
PENSION OPERATIONS ADVISORY COMMITTEE No. 22-06
RE: SUBMISSION TO DOL ON 401(k) PLAN MODEL FEE DISCLOSURE
As we have discussed with the Pension and Pension Operations Advisory Committees, the
Institute has been working with the American Benefits Council to develop recommendations for the
Department of Labor on the information that plan sponsors should receive from service providers in
evaluating the reasonableness of plan service provider arrangements under section 408(b)(2) of ERISA.
The American Council of Life Insurers and the American Bankers Association have joined these
efforts. As DOL expects to move quickly with its project to propose additional guidance on plan
sponsor responsibilities under section 408(b)(2), we need to make our submission to DOL as soon as
possible. We thank you in advance for your quick turn-around in providing comments on this
draft prepared by counsel retained by ICI and ABC.
Because plan sponsors, consultants, and service providers tend to use their own forms, rather
than the 401(k) Model Fee Disclosure Form that currently appears on DOL’s website, we have
tentatively decided not to redesign the Model Form but to provide DOL with a list of fee and service
elements that 401(k) and other defined contribution plan sponsors would need to know (and that
service providers could provide) in order for the plan sponsor to make informed decisions about the
plan’s services and fairly compare providers and investment products.
Attached is a draft of the list of data elements for your review. The list is based on the existing
model form (which was developed by ICI, ACLI, and ABA in 1999), the schedule developed by ICI last
year to disclose revenue sharing and other payments among service providers to a plan, and SEC
guidance on payments involving plan consultants. The draft includes some specific questions the group
has not resolved.
When the Institute submitted its revenue sharing schedule to DOL last year we recommended
that the schedule be limited to third party payments and not include payments or revenue sharing
among affiliates. The rationale for treating payments among affiliates differently was that these
payments typically are only bookkeeping allocations and any potential conflict created by the payment
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will be readily apparent to a plan sponsor. This aspect of our model schedule is controversial with plan
sponsors and DOL. We understand that since last year, Institute members increasingly are providing
information on affiliate payments as a matter of policy or in response to plan sponsor requests. In light
of these developments, the Institute is considering dropping the distinction.
Please provide any comments or suggestions that you have to Mary Podesta (202-326-5826 or
podesta@ici.org) or Mike Hadley (202-326-5820 or mhadley@ici.org) by July 7.
Mary S. Podesta
Senior Counsel - Pension Regulation
Attachment (in .pdf format)