The Labor Department is weighing a rule that would protect the assets of small company 401(k) plans and could be a boon for bank trust departments.
The rule, which could be approved by yearend, would require a pension plan that acts as its own trustee and has fewer than 100 participants to hire independent auditors, said Robert Doyle, director of regulations and interpretations at the Pension and Welfare Benefits Administration.
Companies that want to avoid hiring an auditor would need to use "an approved financial institution" as trustee, he told participants at an American Bankers Association conference on 401(k) plans.
That could drive more business to trust departments, which often serve as trustees for pension plans. Trustees are responsible for the plan's paperwork and serve as fiduciary watchdogs.
The Labor Department does not currently require plans of any size to have corporate trustees. Plans with more than 100 participants, however, must file a reporting and disclosure form, which requires an independent audit.
"These are two alternatives which will protect the assets of the plan," said Judith A. McCormick, senior trust counsel for the American Bankers Association.
Though banks could benefit from the rule change, some might have to turn away business because servicing small plans, which typically have fewer assets and require more hand-holding than large plans, can be cost- prohibitive.
The technology that banks need to use to remain competitive-voice response units, Internet access, and daily valuation, for example-is expensive.
Servicing small plans might not fit into some banks' business models, said Richard C. Suchan, vice president of institutional trust services, at M&T Bank of Buffalo.
The change is being considered in response to accusations that a Connecticut-based company misused funds, said Mr. Doyle of the Labor Department.
