DC industry prepares to avoid new brokerage account regulations
DC members accused the Labor Department of backhanded regulation. They said the guidance document would have required them to monitor all investments – hundreds or thousands – in brokerage accounts, defeating the purpose of giving participants additional choices without requiring verification. fiduciary of the basic alignments of the DC plans.
An intense industry lobbying effort led to the proposal being withdrawn in July 2012.
In August 2014, the department returned with its Brokerage Account Cost, Administration and Disclosure Policy RFI.
Once again, DC business groups have complained about the overbreadth of regulation and the prospect of additional costs and administrative headaches. The agency never acted.
In the RFI, the department expressed concern that sponsors could convert their DC plans into a single self-directed brokerage account to avoid or reduce fiduciary responsibilities and fee transparency.
“We’ve never even seen that considered” by clients, said Ms. Borland, whose company’s record-keeping clients are mostly large employers.
At the smaller end of the DC market, “no customer has asked us to avoid fee disclosure,” said Kevin Mahoney, business development manager at FinDec Co., a Stockton, Calif.-based company. which also provides third-party administration. as estate, insurance and provident services. His company has about 400 DC plan clients with average assets of $2-3 million and an average of about 50 employees. The company offers a brokerage account to clients through Charles Schwab & Co.
“In my experience, that fear has never materialized,” said Mason, who works primarily with large plans, large employers and DC business groups. He suggested that the Obama administration’s Labor Department put brokerage accounts on the back burner because the agency “spent its energy” in 2015 and 2016 developing the fiduciary rule and a rule on state-run self-IRA programs.
The Trump administration, he added, “had a different perspective on many issues,” so brokerage accounts never surfaced as a regulatory issue. Now, with the Biden administration, “that was the next opportunity,” he said.