By Jane Meacham
The U.S. Department of Labor on July 30 quickly revised its field assistance bulletin on retirement plan fee disclosures to clarify a contested question’s impact on so-called brokerage windows and self-directed accounts, which allow plan participants to select investments beyond those designated by an employer-sponsored plan.
In the clarification, a new question replaced the controversial Question & Answer 30 in Field Assistance Bulletin No. 2012-02, or FAB 2012-02, which plan administrators began protesting shortly after its release on May 7 as creating a de facto new rule without the requisite comment period. An industry group asked DOL to explain what was meant by Q&A-30 earlier in July.
On July 30, a Q&A 39 was substituted for Q&A 30 in a new version of the guidelines, called FAB 2012-02R, to allow DOL to clarify its position that nothing in the original bulletin prohibits the use of a platform or brokerage window, self-directed brokerage account or similar plan arrangement in an individual account plan. At the same time, though, it said the May 7 bulletin did not change the regulation or requirements related to fiduciary liability that exist under ERISA.
“Fiduciaries of such plans … are still bound by ERISA section 404(a)’s statutory duties of prudence and loyalty to participants who use the platform or brokerage window, self-directed brokerage account, or similar plan arrangement …,” the new Question 39 continued.
Earlier, Q&A-30 indicated that to avoid having to treat an investment option as “a designated investment alternative” — which would trigger a host of regulatory requirements — a plan would have to make “the required disclosures with respect to all other investment alternatives on the platform in which at least five participants and beneficiaries [or, in the case of plans with more than 500 participants, one percent] are invested on a date that is no more than 90 days preceding each annual disclosure.” Under current regulations, there is no obligation to disclose information with respect to investments that have not been ‘designated’ as plan investments by the plan fiduciary.”
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