Winter 2010
Legislative and Regulatory Watch – January 2010
We’ve compiled a short list of retirement plan regulatory issues worth watching. If you have questions, please contact your client service consultant.
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Fee disclosure. HR 2989 will remain in Ways and Means Committee until February 26, 2010. Two other house bills, HR 1984 and HR 1988, relating to fee disclosure and investment advice are also in house committees. Any of these proposals will require some changes in the way retirement plan providers disclose and present fee information.
- Part-time employees in coverage tests. HR 4126 was introduced to allow counting of part-time employees as fractions in coverage testing. The bill also proposes counting not only vested contributions of non-highly compensated employees but all contributions of highly compensated employees. With the passage of this bill, the need for cross-testing would be eliminated. It has been referred to the Ways and Means Committee.
- Lifetime annuity projections. S. 2832, the Lifetime Income Disclosure Act, would require defined contribution benefit statements to include an illustration of life annuity payments based on total benefits accrued. The bill has been referred to the Senate Committee on Health, Education, Labor and Pensions.
- Target date funds. Senator Kohl, chairman of the Senate Special Committee on Aging, intends to introduce legislation imposing fiduciary responsibility on target date fund managers. The bill is not yet available for review.
- Investment advice for participants. The Department of Labor intends to propose a new regulation in the near future to implement the statutory exemption for investment advice to replace the recently withdrawn regulations.
- 403(b) plan filing program. The IRS is planning to announce a determination letter program for 403(b) plans. Such a program will provide assurance of plan design compliance.
- Plan asset regulation. On January 14, the DOL finalized the rule establishing a seven-day safe harbor for depositing participant contributions in small plans. This change will alleviate some concerns that employee deferrals must be deposited within one or two days in plans with fewer than 100 participants. It is only a safe harbor; in certain circumstances it may be possible to establish compliance although contributions are not deposited to the trust in within seven days.