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Remarks Prepared for Delivery by
U.S. Secretary of Labor Elaine L. Chao
American Society of Pension Professionals and Actuaries Conference
Washington, D.C.
Wednesday, May 21, 2008
Thank you, Stephanie [Napier, Marshall & Ilsley Trust Company N.A., and incoming conference chair].
First, let me thank the American Society of Pension Professionals and Actuaries for again co-sponsoring this important conference with the Department of Labor. This is our fourth annual conference, and it's still the only conference of its kind dedicated solely to issues arising under Title I of ERISA.
I know you've been working closely with Brad Campbell, EBSA's Assistant Secretary, who is doing a terrific job. Since we met last year at this time, Alice Joe has joined the EBSA team as Deputy Assistant Secretary. Alice further strengthens EBSA's mission of protecting retirement and health benefits for 150 million American workers and their families.
This afternoon, let me share some thoughts on how the Labor Department's compliance assistance and regulatory actions have helped protect the hard-earned savings of America's workers. Then I'd like to mention a few of the accomplishments we've achieved over the last seven-plus years.
First, let me talk a little bit about compliance assistance. Employers — particularly smaller ones — frequently lack the expertise or resources to address difficult fiduciary questions, even as they strive to act in the best interests of their employees. And so, through education and outreach, and by partnering with groups like ASPPA, we help well-intentioned employers and service providers comply with the law. And, we help them avoid common mistakes in the complex world of ERISA.
Compliance assistance also allows us to better target our enforcement resources on the bad actors. And, this is one of the reasons EBSA's enforcement results have increased so dramatically under this Administration. In 2007, EBSA reported $1.5 billion in monetary results — double the results in 2001. Its criminal investigations led to 115 criminal indictments. Since 2001, EBSA achieved monetary results of nearly $11 billion, and more than 800 criminal indictments.
Today, EBSA has oversight of more than 700,000 covered retirement plans, 2.5 million covered health plans, and similar numbers of other welfare benefit plans. This is no small undertaking. These plans hold about $6.1 TRILLION in assets and cover approximately 150 million Americans. And that's, in part, why our partnerships with organizations, like ASPPA, are so important. By working together, we can better understand and meet today's financial challenges.
We must also maintain the flexibility that is so key in today's worldwide economy. And, that's been the goal of my Department and the Administration over the past seven-plus years. In January 2005, the Department rolled out the President's comprehensive proposal for private defined benefit plan reform. The goal was to strengthen the retirement system. And, after a strenuous 20-month effort, on August 17, 2006 the President signed the Pension Protection Act of 2006 into law.
The PPA enacted the most sweeping changes to the rules governing retirement plans since the passage of ERISA in 1974. It put into place key reforms in both traditional defined benefit pensions and defined contribution plans. We improved transparency and strengthened funding requirements in the defined benefit system. We also fostered greater participation in 401(k) and similar plans through automatic enrollment. And, we are promoting better outcomes through improved access to professional investment advice and appropriate default investment options.
The PPA also required the Department to initiate numerous regulatory and guidance projects. Since passage of the PPA, EBSA has issued or undertaken 22 PPA-related regulatory or guidance actions. And, we've got an active non-PPA regulatory agenda as well.
Let me mention just a few of the regulatory projects the Department recently finished, or will complete this year.
Last Fall, the Labor Department issued the Default Investment Regulation. This regulation helps ensure that automatically enrolled workers are invested in options appropriate for their long-term retirement savings needs.
Automatic enrollment is key to ensuring that more workers accrue significant retirement savings. We found that about one third of workers eligible to participate in a 401(k)-type plan fail to do so. But, with automatic enrollment, participation is shown to increase to more than 90 percent of eligible workers. The final rule was projected to increase retirement savings in 401(k)-type plans by as much as $134 billion by 2034. This will help many more workers and their families build a nest egg for a secure and comfortable retirement.
In the near future we'll also be proposing an Investment Advice rulemaking. Today, about 50 percent of 401(k) plans don't offer investment advice — in large part, we think — because of liability concerns. The Pension Protection Act addresses this problem by allowing fiduciary advisers to provide investment advice to participants and beneficiaries in IRA and 401(k)-type plans in two circumstances. The first is where the advice is generated by a computer model. The second is where the compensation received by the fiduciary advisor does not vary based on the investment option selected.
Another key issue is plan fees. Over the past two years, we've been involved in a series of three Fee Disclosure rulemakings. Excessive fees can undermine retirement security by reducing the accumulation of assets. So it's critical that workers and plan fiduciaries have the information they need to ensure they're only charged reasonable fees and expenses. And, we have made significant progress in this area. Last November, we issued a final regulation requiring additional public disclosure of fee and expense information on the Form 5500.
Last December, we announced a proposed rule that would enhance disclosure to fiduciaries of 401(k) and other employee benefit plans. This proposed rule will assist fiduciaries in determining the reasonableness of compensation paid to plan service providers. And, we recently held two days of public hearings on service provider plan fee disclosure. We are now evaluating these comments on the proposed regulation.
Finally, the Department will very shortly issue a proposed regulation providing for disclosure of fee and other information to plan participants. This regulation will ensure that workers have the information they need to make informed investment decisions in their self-directed retirement plans.
The Department has devoted significant time and resources over the past two years to developing fee disclosure regulations through an open and public process that has included comments from workers, employers, consumer groups, service providers and the general public. The regulatory process is well-suited to resolving that many complex and technical issues arising in these regulations, and we are nearly finished with our work — we have finalized one of the three regulations, and we will complete the remaining two this year. We hope that the Department will be allowed to complete its work on these regulations before legislative action is taken that could potentially conflict with our efforts to provide more transparency to disclosure fees for the benefit of American workers, retirees and their families.
Since this is my final time to speak to you as the Secretary of Labor, I'd also like to briefly run down a few of the other accomplishments of EBSA during this Administration.
Let me add that I'm very pleased with our success in protecting workers and their pensions impacted by corporate fraud at Enron, Global Crossing, WorldCom, and in the mutual fund trading scandals. At Enron alone the Department recovered more than $220 million on behalf of workers and their families.
I'd also like to note our success in the long running Capital Consultants case. This was made possible through the combined efforts of our Department, the Department of Justice, and the SEC, as well as Capital Consultants' court-appointed receiver and private settlements. This joint effort resulted in a recovery of more than $300 million.
The Department has also accomplished a great deal through our various outreach efforts. Over the past several years, we've distributed over 7 million compliance assistance publications in English and Spanish on a wide array of topics. EBSA Benefits Advisors have responded to nearly 1.3 million total inquiries and recovered over $524 million through informal complaint resolution. We also held two very successful Saver Summits. And, Department officials provided critical assistance to families whose retirement and health benefits were affected by the extraordinary events of September 11, 2001 and Hurricane Katrina.
For almost eight years we've worked to ensure that American workers can enjoy a secure retirement and access to affordable health coverage. We have accomplished a number of our goals. Most notably, the effective implementation of ERISA has benefited millions of Americans, both as workers and investors. But, there is a lot more work to be done. And, I hope in the years ahead, the Department and ASPPA will maintain this partnership that has served workers and the employer and service provider communities so well.
Thank you. I hope you have a great conference!
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