Of particular concern is a provision of the 404(a)5 Disclosure Regulation that appears to require advisers to provide fee and benchmarking information for each designated investment alternative (DIA) in a retirement plan. According to this requirement, advisers would have to provide historical performance data, expense information, performance benchmarks, as well as a “sufficiently specific” URL containing pertinent information for every model portfolio in a plan.
Generating this information would not only be onerous, but unfeasible for some model portfolios. For example, ABG says, risk-based models, which allow investors to choose whether they want conservative, moderate or aggressive asset allocations, often blend mutual funds, making them extremely difficult to benchmark.
“We do not believe that the Department of Labor had any idea of the effective use many advisers and plan participants make of model portfolios in their plans,” said John G. Hopkins IV, CPC, and executive director of Alliance Benefit Group. “We have asked that the DOL provide specific clarification on whether DIAs will cover investment education services, investment services that implement education services, asset allocation models, and managed account services.”
Alliance Benefit Group LLC is a national network of independently owned retirement plan consulting; investment advisory; health and welfare consulting; and benefits administration firms that operate as “Licensees” of Alliance Benefit Group LLC.