Financial advisers and service providers working with retirement plans are trying to avert the possibility of coming under greater regulation by an existing or new government agency.
As the Senate convenes this week to debate its version of a financial services reform bill, financial advisers and service providers working with retirement plans are trying to avert the possibility of coming under greater regulation by an existing or new government agency.
In the reform bill passed by the House in December, a last-minute language change added unregulated retirement plan providers to those who would fall under the jurisdiction of a new consumer financial protection agency.
Capitol Hill pundits think that the CFPA probably won't be created, but they think that the Senate bill could give a new or existing government agency increased authority over an array of financial services entities, including retirement plan providers that may or may not be regulated currently by the Labor Department or the Treasury Department.
“My concern is that my clients are already subject to significant regulatory overlap where agents from different regulatory bodies are coming into their offices, asking for different things,” said Jason C. Roberts, a partner at Reish & Reicher, which represents securities firms and investment advisers. “There is a potential for huge confusion.”
As a result of this concern, the American Society of Pension Professionals and Actuaries, the Investment Company Institute and the National Association of Insurance and Financial Advisors are lobbying senators to exclude service providers and advisers serving the retirement plan market.
“Our concern is that having a third regulator thrown into the mix would be unnecessary and would add to the confusion and the expenses,” said Judy Miller, head of actuarial services at the ASPPA. “Just because it's not called the CFPA, if [this legislation] creates a new department in an existing agency other than Treasury or DOL, then we would have the same concerns.”
The last-minute change to the House bill came at the request of Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, as well as Labor and Treasury officials, according to people familiar with the situation, who asked not to be identified. Its goal is to address situations where plan service providers elude regulation by either the Labor Department or the Treasury Department, said a government official who asked not be identified.
For example, retirement plan providers may market an affiliated institution's individual retirement account as a rollover opportunity for plan participants, the official said. Similarly, a service provider may market another financial institution's consumer loan services.
The House bill also covers regulatory gaps related to information sharing among service providers about plan participants' assets and income, the official said.
RECORD KEEPERS
“I want to be sure that there is more clarity around what makes an adviser or service provider a "non-regulated' entity,” Mr. Roberts said.
One area of contention that the ASPPA is lobbying against is any new regulation of 401(k) plan record keepers.
The group, which represents 7,200 administrators and attorneys who work with 401(k) plans, has drawn up talking points and is meeting with members of the Senate, urging them to remove the House language from their bill.
Specifically, the ASPPA argues that the upcoming Labor Department guidance on 401(k) plan fee disclosure directly affects record keepers, Ms. Miller said. Also, when the Labor Department audits 401(k) plans, it goes into the record keepers' offices, she said.
“If someone thinks there is a hole in regulation, we think they should fill it by providing whatever authority they think is missing to Labor and the Treasury,” Ms. Miller said.
But Labor Department officials argue that they don't cover record keepers. “We don't have jurisdiction over record keepers; we have jurisdiction over plans,” said Gloria Della, a spokeswoman for the department.
Officials at the ICI and NAIFA also said they are busy working with members of Congress to exclude retirement service providers from regulation under a Senate bill.
“If Congress believes there are lapses in federal government oversight of qualified retirement plans, it can plug any gaps by expanding the authority of the Labor and Treasury departments,” said Tom Currey, president of NAIFA.
So far, lobbyists against increased oversight of retirement service providers and advisers are optimistic.
“The people that we have talked to in the Senate seem to be sympathetic, so we are hopeful,” Ms. Miller said.
E-mail Jessica Toonkel Marquez at jmarquez@investmentnews.com.
