Download Collinson111306.pdf

Contents : November 13 2006 (Submitted electronically to e-ORI@dol.gov and sent via U.S. Mail to the following address): Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5669 U.S. Department of Labor 200 Constitution Avenue N.W. Washington D.C. 20210 Attn: Default Investment Regulations Ladies and Gentlemen: Transamerica Retirement Services ("Transamerica") appreciates this opportunity to comment on regulations for default investment alternatives under participant-directed individual account plans (the "Proposed Regulations") recently proposed by the U.S. Department of Labor's Employee Benefits Security Administration (the "Department"). 1 The Proposed Regulations would implement provisions under the Pension Protection Act of 2006 (the "Pension Protection Act") which added section 404(c)(5) under the Employee Retirement Income Security Act of 1974 as amended ("ERISA"). Section 404(c)(5) provides fiduciary relief to plan sponsors and other fiduciaries who invest the account balances of participants who fail to provide investment elections in a "qualified default investment alternative" ("QDIA") in accordance with regulations issued by the Department. Transamerica a marketing unit of Transamerica Life Insurance Company and other of its affiliates design customized retirement plan solutions to meet the unique needs of small to midsized businesses. As of April 2006 Transamerica ranked as a top-ten pension provider and as of June 30 2006 has more than 14 000 retirement plan clients totaling more than $11.95 billion in assets. We congratulate the Department on quickly proposing regulations for default investment alternatives in response to requirements under the Pension Protection Act and we commend the Department's efforts to facilitate the use of default investment alternatives that are likely to increase retirement savings over long periods of time. However we encourage the Department to address several issues in connection with the Proposed Regulations. 1 Clarify that mutual fund redemption fees are not a "financial penalty." The Department should confirm that redemption fees and other policies against frequent trading adopted by 71 Fed. Reg. 56806 (Sept. 27 2006). The Proposed Regulations are required by section 624(b)(2) of the Pension Protection Act of 2006 Public Law 109-280. Office of Regulations and Interpretations Employee Benefits Security Administration U.S. Department of Labor Attn: Default Investment Regulation Page 2 registered investment companies would not violate the condition prohibiting financial penalties and restrictions against the ability of a participant to transfer from a QDIA under 2550.404c-5(e)(2) of the Proposed Regulations. Clarify circumstances in which a participant "did not direct the investment of assets." The Proposed Regulations should be clarified so that a participant who may have previously provided investment instructions will be deemed to have "had the opportunity to direct the investment of assets in his or her account but did not direct the investment of assets " as specified by 2550.404c-5(c)(2) if the participant fails to respond within a reasonable time to a request for new affirmative investment instructions. This would provide plan sponsors important flexibility in initially transitioning participant investments from existing default alternatives to QDIAs to obtain relief under section 404(c)(5). It also would facilitate the use of appropriate default investments in a range of situations on an ongoing basis. Modify timing for notice in the case of "immediate participation" plans. The Proposed Regulations should be revised to allow less than 30 days advance notice concerning the investment of assets in a QDIA in the case of participants eligible for automatic enrollment under "immediate participation" plans because it is not workable to require notice in advance of a participant's actual employment commencement date. Revise participant investment information requirements. The Department should reconsider the requirement proposed under 2550.404c-5(c)(4) to provide to each participant any materials provided to the plan relating to the participant's QDIA investment because this requirement would be administratively burdensome for plans and confusing rather than helpful to participants. Instead participants should receive a simplified disclosure document such as a "fact sheet" containing key information about the QDIA. Include capital preservation products as QDIAs. Transamerica strongly agrees with comments that are being provided to the Department by others including the American Council of Life Insurers and the American Benefits Council urging the Department to include capital preservation products including stable value and money market funds among the types of investment products eligible to be QDIAs. Coordinate the regulations with preemption relief under sec

INFO HASH : 46211835659c069483bc093ac8b7f073e617d79f

Download now

File Size: 65.3 kb