Proposed government regulations to enhance disclosures to beneficiaries of retirement plans have drawn criticism from agents, brokers and plan representatives who say the proposal would be a burden and could overwhelm those it seeks to protect.
The proposal, one of several the Department of Labor is undertaking under pressure from Congress and consumer advocates, would require that contracts between certain service providers and benefit plans provide for specific and detailed information. Additionally, all services furnished to a plan and all compensation–direct and indirect–to be received by the service provider would have to be disclosed in writing. The proposed rules would also require the disclosure of possible conflicts of interest of the service provider that may affect the performance of plan services.
In commenting on the proposal, however, groups representing agents and brokers argued that the proposed rules would be overly broad, and called on the department to revise its proposal.
The Alexandria, Va.-based Independent Insurance Agents and Brokers of America argued that the proposal relies too heavily on a "one-size-fits-all disclosure paradigm" which it argued would create an "unprecedented" burden of disclosure.
In a comment letter by Robert Rusbuldt, president and chief executive officer of the IIABA, he argued: "There is no basis or justification for imposing such a broad administrative burden on an industry that is already heavily regulated, especially when the ramifications for failing to adhere to the strict letter of the regulation would be severe."
That sentiment was echoed in comments from the Washington, D.C.-based Council of Insurance Agents and Brokers, which noted that in addition to being "heavily regulated" by the states, most carriers also require "significant disclosure" as a contractual matter.
"We fully understand the department's interest in putting some specificity into the requirements, but we urge the department not to rush to cover all plans and all service providers under one regime," CIAB President Ken Crerar said in a statement. "The adage that one can't fit a square peg into a round hole may hold true here."
The IIABA also argued that the marketplace "is already ensuring" that plan sponsors possess helpful and useful information, "and there is nothing in the proposal and accompanying discussion that suggests plans are "unable or hindered" in their efforts to obtain the information they need to choose insurance service providers.
That's because the proposed regulation "does not adequately consider the manner in which the insurance industry is distinct and different from other financial services sectors," the IIABA said.
Plan representatives expressed concern regarding how effective the disclosure rules would actually be.
Thomas Wilder, senior regulatory counsel for the America's Health Insurance Plans based in Washington, D.C., said in a statement the association is "concerned" that the regulations "may impose significant administrative burdens on the very plan fiduciaries it is meant to assist," in addition to the plan service providers.
"We also believe the proposed rule will result in 'information overload' that does not lead to meaningful transparency," he said.
He argued that plan beneficiaries would be deluged with information because of the broad scope of the regulations and the severity of the penalties for violations, which include contract termination, civil penalties, or the disqualification of the provider.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.