July 31, 2006

Robert J. Doyle
Director, Office of Regulations and Interpretations
Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Ave., NW, Room N5669
Washington, DC 20210

Dear Bob:

For many years, the Investment Company Institute (ICI), the American Benefits Council (ABC), the American Council of Life Insurers (ACLI), the American Bankers Association (ABA) and the Securities Industry Association (SIA) have worked to help assure that 401(k) plan fiduciaries have access to the information they need to make sound decisions on behalf of their plans and plan participants. In light of this, we very much appreciate the discussions we have had with you and others in the Department regarding the guidance the Department is developing under ERISA Section 408(b)(2) related to fee disclosure between plan fiduciaries and service providers. To offer input to the Department that may be of help as you formulate the new 408(b)(2) guidance, ICI, ABC, ACLI, ABA and SIA have worked together to develop the attached fee and expense reference tool.

The attached list identifies service- and fee-related data elements we believe defined contribution plan sponsors and service providers may want to discuss when entering into agreements. We offer the list as a reference tool for plan sponsors and providers to use in complying with their 408(b)(2) responsibilities and we hope the Department will recommend its use.¹ We believe that communication regarding the data elements on the list is one way that plan fiduciaries and providers can comply with their disclosure obligations under 408(b)(2). We request that the Department make clear that use of the list is one way, but not the exclusive way, to satisfy such obligations.

This list was developed by ICI, ABC, ACLI, ABA and SIA with significant input from the plan sponsor, service provider and consultant communities to reflect best practices used by sponsors, providers and consultants in today's marketplace. We believe that many plan sponsors, providers and consultants follow such an approach to disclosure today and that the current system of fee disclosure is not broken. Indeed, while the plan fiduciaries, service providers and consultants we represent agree that additional 408(b)(2) guidance could be helpful, they are concerned about the prospect of complex and burdensome new disclosure requirements. For example, new requirements that increase liability exposure or compliance costs in a significant way could lead to less choice among service providers and higher costs for plan participants. We trust the Department will weigh carefully the costs and benefits of any new requirements as part of its 408(b)(2) guidance project.

The data element list we have developed is designed to cover the full diversity of services and investment products provided to defined contribution plans (often in a bundled package) and to allow meaningful comparison among and between these products, services and bundled arrangements. A list that provides useful fee disclosure regardless of the specific investment product or service helps ensure a level playing field in the marketplace among different service providers and financial services industries. The tool also is intended to accommodate the innovations in defined contribution plan products and services that will occur over time.

In developing the list of data elements, we sought to build on the Department's existing regulatory guidance and educational materials regarding 401(k) fee disclosure, including the 401(k) Plan Fee Disclosure Form, which ICI, ACLI and ABA were involved in developing in the late 1990's and which the Department makes available as a tool for plan fiduciaries. In reviewing the existing materials, we asked what additional fee-related information might be of use. For example, the 401(k) Plan Fee Disclosure Form does not call for information about the allocation of payments among service providers, although that information is now commonly provided. Therefore, our list includes data elements plan fiduciaries and service providers can use to discuss the extent to which a service provider receives compensation in connection with its services to the plan from other service providers or plan investment products (e.g., "revenue sharing" or "finders' fees"). This information will allow plan sponsors to evaluate any potential conflicts of interest that may arise in how fees are allocated among service providers.

Our submission is a list of data elements to be discussed by sponsors and providers rather than a specific form on which fee information should be displayed so that plan sponsors and providers can retain flexibility with respect to the specific format in which fee information is transmitted. Sponsors, their consultants and service providers today make successful use of a range of fee disclosure formats and we see no reason to impair this flexibility going forward. We also believe that a data element approach can accommodate ongoing innovation in defined contribution plan products and services as well as future changes in fee structures.

We tried to develop a tool that is comprehensive but not excessively detailed. The specific services on our list frequently are offered for a single price (although in some cases providers may break down services into more discrete categories and charge for these categories separately). We intend that, in using the list, plan sponsors would inquire about the scope of specific services that are included (and not included) within a particular service element and its related fee. For example, we list nondiscrimination testing as an element under compliance services but do not list the various types of nondiscrimination tests. Plan sponsors would inquire about specific aspects of nondiscrimination testing (e.g., ADP/ACP, monitoring of dollar and plan limits, making refunds of excess contributions in connection with testing failures, 410(b) coverage testing) included within a service provider's fee (or separate testing charge, if any).

The list can accommodate the practice of bundling many of the specific service elements into a single product with a single fee. The service provider would not show separate charges for the various elements covered by the bundled fee but would make clear what services are included. In this regard, we hope the specificity of our list might assist plan sponsors and providers when discussing the services that are and are not included in the single bundled fee. In addition, while certain charges might be reflected under multiple data elements on our list, we have made clear that each charge should be noted only once. We strongly believe that redundant or duplicative disclosure of a service fee or product charge should be avoided as "double disclosure" will confuse rather than clarify the costs charged to the plan.

We recognize that many plan sponsors seek bottom line cost or expense levels for their plans after inquiring about the specific services to be provided, the component charges for those services and any payments from third parties that may offset particular costs. For example, it is common for plan sponsors to ask for a total cost for all investment-related services and a total cost for all other (administrative) services. Our list would not preclude the use of bottom line cost figures and could assist in discussions about such costs.

We believe the role for the list of data elements we submit today is as a reference tool for plan sponsors and service providers to use in complying with their responsibilities under 408(b)(2).² This new tool, which has been developed by the private-sector, could be used in conjunction with, and as a complement to, the additional guidance the Department will issue under 408(b)(2). To that end, we intend to publicize and distribute the list within our respective memberships and encourage its use among our member companies. To facilitate its broadest possible use, we urge the Department to make the list available on its website and to include it in its fiduciary education materials in order to indicate to sponsors and providers the role that the list can play as a compliance tool. We believe that communication regarding the various fees contained on our list is one of a number of ways for plan sponsors and service providers to meet their disclosure and information-exchange responsibilities under 408(b)(2) and we request that the Department confirm this view. We want to make clear that we do not intend for this list to be incorporated as a requirement into the new 408(b)(2) regulations.

We appreciate your consideration of our submission in connection with your upcoming guidance under 408(b)(2). We would be pleased to meet with you to discuss these matters in greater detail and will follow up by phone in the near future. Please feel free to contact any of the individuals and organizations listed below.

Sincerely,

Mary D. Podesta Jan Jacobson
Senior Counsel, Pension Regulation Director, Retirement Policy
Investment Company Institute American Benefits Council

Ann B. Cammack Lisa J. Bleier
Senior Vice President, Taxes and Retirement Security Senior Counsel
American Council of Life Insurers American Bankers Association

Liz Varley
Vice President and Director, Retirement Policy
Securities Industry Association

Enclosure

cc: Ann L. Combs, Assistant Secretary, EBSA
Bradford P. Campbell, Deputy Assistant Secretary for Policy, EBSA
Alan D. Lebowitz, Deputy Assistant Secretary for Program Operations, EBSA
Lou Campagna, Fiduciary Interpretations and Regulations Division Chief, EBSA
John J. Canary, Reporting and Disclosure Division Chief, EBSA

1 This list is intended only as a tool for fee disclosure between plan sponsors and service providers and is not intended to address the other fee disclosure issues the Department has under review: disclosure of fee information on the Form 5500 and related schedules, and disclosure of fee information to plan participants.

2 Should a glossary of relevant terms be regarded as a helpful adjunct to the data element list, we would be pleased to discuss how such a glossary might be developed.