ERISA-DOL Revises Its Guidance On Participant Fee Disclosures To Eliminate Disclosure Of Information For Investments Obtained Through Brokerage Windows

The Department of Labor (the “DOL”) has replaced Field Assistance Bulletin No. 2012-02, which provides guidance on the new participant fee disclosure rules (found in 29 CFR section 2550.404a-5 (the “regulation”)), with Field Assistance Bulletin No. 2012-02R. The change? Q&A-30 appearing in Field Assistance Bulletin No. 2012-02 has been deleted, and replaced in Field Assistance Bulletin No. 2012-02R with new Q&A-39.

Q&A-30 had required a plan with over 25 investment alternatives to disclose information for an investment acquired through a brokerage window or similar arrangement, if that investment was so acquired by a specified minimum number of participants, and even if the investment is not otherwise a designated investment alternative under the plan. New Q&A-39 does not have this requirement. Rather, Q&A-39 indicates that, when a plan permits participant investment through a brokerage window, self-directed brokerage account, or similar plan arrangement (for convenience, a “brokerage window”), and the plan’s fiduciary does not designate any of the investments available through the brokerage window as a “designated investment alternative” under the plan , then neither the brokerage window nor any investment acquired through it is treated as being a designated investment alternative for which information disclosure is required under the regulation. To be a designated investment alternative, an investment must be specifically identified as available under the plan.

The Q&A does caution that, in the case of a 401(k) plan 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 brokerage windows that enable participants 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 those participants, including taking into account the nature and quality of services provided in connection with the brokerage window.

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