On May 7, the Department
issued Field Assistance Bulletin No. 2012-02, which provides guidance to
its field enforcement personnel in question and answer format on 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”).
Some plan sponsors and service providers asked questions about
statements in Question 30 regarding brokerage windows and other
arrangements that enable plan participants and beneficiaries to select
investments beyond those designated by the plan (see “DOL’s Answer in Fee Disclosure Guidance ‘Surprising’”).
The
Department decided to issue Field Assistance Bulletin No. 2012-02R to
further clarify its position and to give interested parties more time to
engage in discussions with the Department on practical and cost
effective ways to ensure participants and beneficiaries receive all the
fiduciary protections afforded to them under the Employee Retirement
Income Security Act (ERISA) when they use brokerage windows and other
similar arrangements, including, if appropriate, through amendment of
relevant regulatory provisions.
Q39:
A plan offers an investment platform that includes a brokerage window,
self-directed brokerage account, or similar plan arrangement. The
fiduciary did not designate any of the funds on the platform or
available through the brokerage window, self-directed brokerage account,
or similar plan arrangement as "designated investment alternatives"
under the plan. Is the platform or the brokerage window, self-directed
brokerage account, or similar plan arrangement a designated investment
alternative for purposes of the regulation?
A39.
No. Whether an investment alternative is a "designated investment
alternative" (DIA) for purposes of the regulation depends on whether it
is specifically identified as available under the plan. The regulation
does not require that a plan have a particular number of DIAs, and
nothing in this Bulletin prohibits the use of a platform or a brokerage
window, self-directed brokerage account, or similar plan arrangement in
an individual account plan. The Bulletin also does not change the 404(c)
regulation or the requirements for relief from fiduciary liability
under section 404(c) of ERISA or address the application of ERISA's
general fiduciary requirements to SEPs or SIMPLE IRA plans. Nonetheless,
in the case of a 401(k) or other individual account plan covered under
the regulation, a plan fiduciary's failure to designate investment
alternatives, for example, to avoid investment disclosures under the
regulation, raises questions under ERISA section 404(a)'s general
statutory fiduciary duties of prudence and loyalty. Also, fiduciaries of
such plans with platforms or brokerage windows, self-directed brokerage
accounts, or similar plan arrangements that enable participants and
beneficiaries to select investments beyond those designated by the plan
are still bound by ERISA section 404(a)'s statutory duties of prudence
and loyalty to participants and beneficiaries who use the platform or
the brokerage window, self-directed brokerage account, or similar plan
arrangement, including taking into account the nature and quality of
services provided in connection with the platform or the brokerage
window, self-directed brokerage account, or similar plan arrangement.
The
Department understands plan fiduciaries and service providers may have
questions regarding the situations in which fiduciaries may have duties
under ERISA's general fiduciary standards apart from those in the
regulation. The Department intends to engage in discussions with
interested parties to help determine how best to assure compliance with
these duties in a practical and cost effective manner, including, if
appropriate, through amendments of relevant regulatory provisions.
FAB 2012-02R is at http://www.dol.gov/ebsa/regs/fab2012-2R.html.