Compliance December 2, 2006

EBSA Asks for a Hand in Developing 401(k), IRA Advice Regs

As federal regulators continue filling in the detailed framework for the Pension Protection Act’s (PPA) provisions, they are now asking for public comment on the PPA’s investment advice exemption for 401(k) plans and IRAs.

Reported by

Fred Schneyer

The Department of Labor’s Employee Benefits Security Administration (EBSA) on Friday released two requests for information (RFI) on how to implement the PPA’s amendment of the Employee Retirement Income Security Act (ERISA) in the closely watched area of plan advice.

The new prohibited transaction exemption allows greater flexibility for investment advisers to give advice to participants of 401(k) plans and IRAs and gives the Labor Department regulators the task of spelling out the details.

As Friday’s EBSA announcement points out, one of the ways in which advice may be given under the exemption is through the use of an unbiased computer model which must be certified by an independent expert under rules to be prescribed by the department.

The RFI on investment advice for 401(k)-type plans asks for the public’s help in determining what expertise and procedures may be needed to qualify an expert to certify a computer model under the exemption. Also, since the PPA requires the department to issue a model notice on fee disclosures related to the advice, the RFI asks for information on the types of fee disclosure materials currently used and their usefulness to plan participants.

EBSA is also asking for help deciding how to assess the feasibility of using computer models to provide advice to IRA participants. The PPA requires the department to solicit information from at least the top 50 IRA trustees and other entities offering computer model investment advice programs.

Written comments on the RFI for investment advice for 401(k) plans should be addressed to the Office of Regulations and Interpretation, Employee Benefits Security Administration, Room N-5669, U. S. Department of Labor,Attn: 401(k) Plan Investment Advice RFI.

Written comments on the RFI for investment advice for IRAs should be submitted to the same address, Attn: IRA Investment Advice RFI.

The public also may submit comments electronically by email to e-ori@dol.gov (for the 401(k) Plan Investment Advice RFI) or e-OED@dol.gov (for the IRA Investment Advice RFI).

Finally, input can be transmitted through the federal e-rulemaking portal at www.regulations.gov.