Lawmakers in Washington are discussing scrapping the conflicted-advice provision of the 401(k) Fair Disclosure and Pension Security Act of 2009, a move that would be welcomed by many in the financial services industry.
The advice provision of the bill, which was approved by House Education and Labor Committee in June, would have allowed only independent advisors to work with 401(k) plans.
Currently, the majority of 401(k) providers offer advice to participants in accordance with the Department of Labor’s 2001 SunAmerica advisory opinion, which allows providers to offer advice through an affiliate using an independently developed computer model.
“The advice bill cast a cloud over every product on the market today,” said Ed Ferrigno, vice president of Washington affairs at the Profit Sharing/401(k) Council of America. “This would be very good news for the entire industry.”
During a House Ways and Means Committee hearing in October, Rep. Earl Pomeroy, D-North Dakota, slammed the advice portion of the bill, saying it would “have the impact of reducing independent advice that’s presently available.”
Now members of the House Ways and Means and Education and Labor committees are discussing taking the advice part out of the bill. The legislators will most likely leave in proposals that would require greater 401(k) fee disclosure, according to people familiar with the situation.
Aaron Albright, a spokesman for the House Education and Labor Committee, said no decisions had been made yet. Lauren Bloomberg, a Ways and Means Committee spokeswoman, didn’t return a call for comment by deadline.
The 401(k) Fair Disclosure and Pension Security Act of 2009 is sponsored by House and Education Committee Chairman George Miller, D-California, and Rep. Rob Andrews, D-New Jersey.