September 10, 2012
--- Brokerage windows should not be used to sidestep fee disclosure, a source from the Department of Labor (DOL) stressed. ---
“We don’t like the idea that people might be using brokerage windows as a way to evade the rule,” Michael Davis, deputy assistant secretary for the DOL, told attendees at the 2012 PLANADVISER National Conference. Davis cautioned those who may be advising clients to add brokerage windows to retirement plans in order to avoid having designated investment alternatives (DIAs) and thus avoid fee disclosure.
The DOL’s guidance about brokerage windows appears to be a warning shot for plans trying to do just that. In July, the DOL’s Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin (FAB) No. 2012-02R, which superseded Field Assistance Bulletin No. 2012-02. The DOL issued its original FAB to provide guidance to its field enforcement personnel in question-and-answer format about the obligations of plan administrators under a final regulation to improve transparency of fees and expenses to workers with 401(k)-type retirement plans (see “DOL Issues Additional Guidance for Participant Fee Disclosures”).
While the revised FAB does not prohibit brokerage-window only plans, Davis stressed that not having any DIAs raises concerns. “We think that it is better to have designated a suite of options,” he added.
Those who want to continue using only brokerage windows should give it serious thought, Davis said, adding that plan sponsors should determine the reason they have only a self-directed brokerage window option. If the reason is to evade disclosure rules, the DOL “certainly has issues with that,” Davis said.