ABA Says DoL Didn’t 'Strike the Right Balance'

“While the Department’s proposal is certainly well-intentioned, it unfortunately does not strike the right balance between disclosure that a plan participant needs to make an informed decision and disclosure that is confusing, overly complex and possibly even misleading,” the letter said.

The ABA said its concern was that the DoL “has proposed a disclosure regime appropriate only for mutual fund products, not one that works well for many other fiduciaries, the institutions that serve those fiduciaries, plan participants, or many of the investment products offered to those participants.”

Specifically as it relates to bank collective funds, the ABA presented three main concerns regarding the DoL’s proposal:

• The department should not impose a mutual fund disclosure structure best suited for a retail market on bank collective funds, which are only used in the institutional market. Plan participants will lose the benefits of the low cost nature of collective funds if plan service providers are required to create disclosure formats and pricing plans that are structured in a manner similar to those required for registered mutual funds.
• In all likelihood, plan participants will pay the costs associated with implementing new disclosures. The department should make every effort to ensure that any proposed disclosure requirements include only that information that is necessary for a plan participant to make informed investment decisions.
• The proposed disclosure regime leaves open to interpretation many terms and calculations that previously have been required to be used only by mutual funds, regulated by the Securities and Exchange Commission (SEC). Bank collective funds are subject to the Employee Retirement Income Security Act (ERISA) and banking law, not the federal securities laws. We have concerns that SEC interpretations that currently and appropriately apply only to mutual funds will now govern all investment products, including bank collective funds.

The ABA suggested the DoL work with the banking regulators on a more appropriate disclosure program that gives plan participants the necessary information to make informed investment decisions regarding bank collective funds “to ensure that bank collective funds remain a viable low-cost investment option for plan participants.’