New DOL Guidance Provides Relief, But Concerns Remain

The Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin (FAB) No. 2012-02R, which supersedes Field Assistance Bulletin No. 2012-02. On May 7, the DOL 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 were concerned about 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’”).   

Jason Roberts, CEO of Pension Resource Institute and managing partner at Roberts Elliott LLP, told PLANADVISER that some in the industry thought the DOL had essentially created a rule through Field Assistance Bulletin 2012-02. The revised FAB seems to provide some relief for plan fiduciaries concerned about the original guidance.

“While the original FAB 2012-02 would essentially have created new law—imposing unreasonable requirements on employers that provide mutual fund windows and brokerage windows as investment options in their 401(k) plans—the revised FAB … takes a much more practical approach,” said Lynn Dudley, American Benefits Council senior vice president of policy, in a statement.

American Benefits Council said the revised FAB eliminates several significant fiduciary requirements that were not provided under current law but had been included under question 30 of the FAB as originally drafted—including requirements that a plan must have “a manageable number of investment alternatives,” monitor for “significant investment through a brokerage window” and provide participant disclosures for any investment selected through a brokerage window by at least 1% of participants to qualify for the safe harbor test.


“In the short term, this [revised FAB] certainly addresses the issues the Department of Labor created,” said Bradford Campbell, counsel, Drinker Biddle & Reath LLP’s Employee Benefits & Executive Compensation Practice Group, and EBSA’s former assistant secretary of labor. “They stopped trying to write regulatory language into a guidance document.”

However, Campbell said he is still concerned about one sentence in the revised FAB: “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" (see "DOL Issues Clarification to Participant Fee Disclosure Guidance").

This sentence suggests that an entire plan design—a brokerage window-only design—may not be appropriate according to the DOL, Campbell said. He added that the original regulation did not require a plan to have a certain number of designated investment alternatives (DIAs), but the FAB suggests that if a plan does not, it raises fiduciary questions.

“With respect to a plan that has a robust menu and a brokerage window, I don’t think anything has changed,” he said, but brokerage window-only plans could run into trouble in the future. This may be DOL’s “warning shot,” he noted.

Roberts agrees that the DOL may be more closely monitoring these types of plans. “It tells me they’re going to look into the decisions made around those options,” he said.  

FAB 2012-02R is available at