March 17, 2004
Council Meets with DOL on Mutual Fund Issues
On March 16, representatives of the Council met with senior Department of Labor (DOL) staff members to discuss retirement plan issues raised by rules recently proposed by the Securities and Exchange Commission (SEC).
The Council discussed retirement plan concerns regarding the SEC's proposed mandatory 2 percent redemption fee (See the March 5 Benefits Byte) designed to address market timing concerns. The Council pointed out that common non-abusive plan transactions such as loans, qualified domestic relations orders and withdrawals would often result in imposition of the mandatory fee. The Council also indicated that although many plan sponsors and service providers do not want a mandatory fee, preferring a fair value pricing solution to market timing, there is a need for uniformity that is lacking in the proposed rule. Council members also noted that the cost of compliance with the proposed rule would be substantial.
The Council also discussed the SEC's hard 4 p.m. close proposal (See the December 3, 2003 Benefits Byte) and broached the idea of DOL oversight of retirement plans to complement the SEC oversight of other intermediaries. The SEC has expressed concern over the amount of resources it would take for the SEC to exert jurisdiction over all of the numerous intermediaries that take mutual fund orders and the DOL is more familiar with retirement plans and their service providers. One idea that was discussed was a report or schedule added to the 5500 through which the intermediary or its auditors would certify that no late trades have taken place.
The Council's comments appeared to be favorably received and the dialogue regarding these issues will continue. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.
FASB Issues Proposed Staff Position on Accounting and Disclosure Requirements Related to Medicare Prescription Drug Legislation
On March 12, the Financial Accounting Standards Board (FASB) issued proposed Staff Position (FSP) FAS 106-b to provide guidance on FAS 106 accounting for the effects of the new Medicare prescription drug law. The Medicare bill allows a federal subsidy for employers who provide a prescription drug benefit to Medicare-eligible retirees that is "actuarially equivalent" to the Medicare prescription drug benefit, and the FSP provides that the subsidy should be recognized currently in the plan's obligations as an actuarial gain because it reduces a company's future health care liabilities. The FSP would be effective for interim or annual periods beginning after June 15, 2004, and companies that already attempted to calculate the accounting effects must recalculate their financial statements using this guidance. This is consistent with FASB's staff position issued in January 2004.
The FASB is accepting comments on the proposed FAS 106-b until April 12, 2004, and expects to issue a final FSP by the end of April. For more information, contact Susan Relland, Council health policy legal counsel, at (202) 289-6700.
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The Amerian Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.