August 21, 2014
DOL Requests Information on Use of Brokerage Windows in 401(k) Plans
On August 20, the Department of Labor (DOL) released a request for information (RFI) on the use of brokerage windows, self-directed brokerage accounts and similar features in 401(k)-type plans. The DOL indicated that the purpose of the RFI is to increase its understanding of brokerage windows and that the information received “will assist the Department in determining whether, and to what extent, regulatory standards or safeguards, or other guidance, are necessary to protect participants’ retirement savings.”
This RFI follows guidance issued by the DOL on participant disclosure regulations and Field Assistance Bulletin 2012-02 (FAB 2012-02).The regulations require that certain information, such as fee and historical investment performance, is provided to participants regarding a plan’s designated investment alternatives, or the investment options specifically offered by the plan. The regulation makes clear that brokerage windows and other similar plan features are not designated investment alternatives; however, the regulation does require some disclosure when a plan offers a brokerage window.
FAB 2012-02 specifically addressed brokerage windows in Q&A-13 and Q&A-30. Q&A-30 raised the possibility that in some cases, plan fiduciaries would be required to provide disclosure information with respect to certain investments available through the brokerage window. Because of widespread concerns about Q&A-30, FAB 2012-02 was amended, and Q&A-39 replaced Q&A-30, which was withdrawn. Q&A-39 indicated that the DOL may be returning to issues regarding brokerage windows; this RFI is the first step in that process.
The RFI notes several concerns raised about brokerage windows, including that plan participants may not be sufficiently protected against potentially costly or unsuitable investments because plan fiduciaries do not review the investment options available through a brokerage window. The RFI also asks thirty-nine questions, which are divided into the following categories:
- Defining Brokerage Windows
- Plan Investment Offerings – Brokerage Windows and Designated Investment Alternatives
- Participation in Brokerage Windows
- Selecting and Monitoring Brokerage Windows and Service Providers
- Fiduciary Access to Information about Brokerage Window Investments
- Brokerage Window Costs
- Disclosure Concerning Brokerage Windows and Underlying Investments
- The Role of Advisers
- Fiduciary Duties
- Annual Reporting and Periodic Pension Benefit Statements
The Council anticipates filing comments. The comment period closes on November 19. For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.