<nobr>Jul 1, 2009</nobr>

House Committee Approves Fee Disclosure, Investment Advice and Pension Relief Legislation

The House Education and Labor Committee on June 24 reported out H.R. 2989, the "401(k) Fair Disclosure and Pension Security Act of 2009" by a vote of 29 to 17 (mostly along party lines). H.R. 2989 represents a combination of Committee Chairman George Miller's 401(k) fee disclosure legislation, H.R. 1984 the "401(k) Fair Disclosure for Retirement Security Act of 2009" and Representative Andrews' (D-NJ) investment advice provisions contained in H.R. 1988, the "Conflicted Investment Advice Prohibition Act of 2009," as well as various defined benefit funding relief provisions.

During his opening remarks, Chairman Miller noted that the relief provisions for defined benefit plans are placeholders and a "work-in-progress" for more comprehensive relief to be included at a later date. Chairman Miller also emphasized the need to coordinate with the House Ways and Means Committee on these issues. At this point, the Ways and Means Committee has not indicated whether it will schedule a mark-up of this legislation.

In total, members of the committee offered eight amendments to the bill and only two passed. The amendments that passed include:

• An amendment offered in the nature of a substitute (substitute bill appears below); and


• An amendment offered by Rep. Brett Guthrie (R-KY) to expand single-employer funding relief to include the 2+7 amortization and expand the funding corridor from 10% to 20%. He later withdrew this amendment and offered a new amendment that only included the 2+7 amortization relief. This revised amendment passed unanimously.

While H.R. 2989 currently contains defined benefit funding relief without a "maintenance-of-effort" provision, it is possible, however, that the "comprehensive" funding provisions the Chairman is working on will include some maintenance-of-effort provision in the future. Other funding provisions in the bill include:

• Allowing plan sponsors to revoke their election to use the yield curve in the year 2010;


• Postponing the effective date of the funding rules in the Pension Protection Act of 2009 to plan years beginning after December 31, 2009;


• Clarifying that plan-related administrative expenses do not include investment expenses (clarification to the Worker, Retiree and Employer Recovery Act (WRERA));


• Expanding the section 4010 reporting requirements to the PBGC for the following situations: where the funding target percentage of the preceding plan year is less than 80% or the aggregate unfunded vested benefits exceeds $50 million.

Investment Advice Provisions

The investment advice provisions are similar to those contained in H.R. 1988, the "Conflicted Investment Advice Prohibition Act of 2009," which seeks to prohibit "self-interested" investment advisers from providing advice to employer-sponsored retirement accounts. In general, H.R. 1988 would define an "independent investment adviser" as one who is a fiduciary of the plan by virtue of the advice they provide to the plan.

Hill staff noted that they would carve out investment advice provided under "SunAmerica" arrangements from the "prohibition on conflicted advice" as defined in the bill. The chairman's mark did not include a carve-out for SunAmerica arrangements, which means that the bill as currently written would prohibit providing investment advice under the Department of Labor's SunAmerica advisory opinion.

Section 102 of H.R. 2989 contains a minimum investment option under section 404(c) described as "a passively managed investment with a portfolio of securities that is designed to be representative of the U.S. investable equity market (including representation of small, mid and large cap stocks) or the U.S. investment grade bond market (including Treasury, agency, non-agency and corporate issues) or a combination thereof." This provision continues to raise concerns among plan sponsors and service providers as it is unclear what current investment option would satisfy this requirement.

Questions or comments on this legislation should be addressed to Kathryn Ricard (kricard@eric.org).

House Education & Labor Release/Summary

H.R. 2989

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