Fee Investment Advice Bill: Changes Could Undo SunAmerica Arrangement

July 1, 2009

The House Education & Labor Committee has approved bills related to fee disclosure and financial advice from financial institutions. One bill provides for enhanced fee disclosure for retirement plan participants, providers and sponsors. If enacted, the bill would require investment returns to be compared to appropriate benchmarks. It would also require the Department of Labor (DOL) to study whether benchmark provisions were helpful to plan participants.

The other bill would roll back the expanded investment advice provisions contained in the Pension Protection Act of 2006 that allowed plan providers to give advice on their own funds to plan participants. The bill, if enacted, also would suspend provisions in the SunAmerica ruling that guide how some financial institutions deliver investment advice to retirement plans.

While the 401(k) Fair Disclosure and Pension Security Act of 2009, (H.R. 2989), generally follows the legislation approved by the Health, Education, Labor and Pensions Subcommittee, a last minute addition to the bill deletes what are known as SunAmerica arrangements.

The SunAmerica arrangement, based on pre-PPA advisory opinions from the Department of Labor, allows financial institutions to provide certain investment advice when the advice is offered by an independent financial expert. The proposed bill would invalidate that provision. As a result, financial institutions would be barred from providing investment advice to a plan if they also offer investment products to the plan.

The House Ways & Means Committee is expected to weigh in on the advice provisions contained in the Miller bill with an eye towards retaining the SunAmerica arrangement. And while H.R. 2989 may pass the House, it is not expected to receive Senate approval this year.

In the meantime, a number of industry groups are supporting efforts to, at a minimum, retain existing SunAmerica guidance and have reached out to members of the Ways & Means Committee and others in leadership to assist in that regard.