many people seem to be missing the trees for the forest,” reading the
disclosure to exempt model portfolios from DIA status but not focusing on the
conditions required of such a model portfolio, Bradford Campbell, former
assistant secretary of labor for the Employee Benefits Security Administration
(EBSA) and currently of counsel, the Employee Benefits &
Executive Compensation Practice Group at Drinker Biddle & Reath LLP, told PLANADVISER.
DOL guidance essentially creates a new disclosure category for these non-DIA
model portfolios because there are three required, but not well-explained
disclosure conditions,” Campbell said. The model portfolio is not a DIA
“if it is clearly presented to participants as merely a means of allocating
assets among specific plan DIAs.” Further, Campbell said, the guidance
provides that the plan administrator “must clearly explain how the portfolio
differs from the plan DIAs" and “should clearly explain” how each model
and Campbell explained that allocating to other plan DIAs alone will not
prevent a model portfolio from itself being a DIA and that certain information
must be clearly presented and explained. “It’s pretty clear that in DOL’s view,
this is a requirement,” Campbell said, but he believes the
Department should clarify these standards in additional guidance.
28 presents some interesting issues for plan sponsors and advisers to consider,
Reish said. For example, who is going to create the participant statements
explaining how the model portfolio functions and how it differs from the plan’s
information must be distributed to participants before they direct their
investments, as well as annually, Reish added. The plan sponsor must also
determine who will be sending this information to participants.