American Benefits Council
Benefits Byte

2014-113

November 19, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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Council Provides Input to DOL on Use of Brokerage Windows in 401(k) Plans

In a November 19 letter to the U.S. Department of Labor (DOL) Employee Benefit Security Administration (EBSA), the Council expressed the strong belief that DOL “has already provided sufficient guidance on brokerage windows to serve the needs of plan sponsors and to protect participants.” We are particularly concerned that additional guidance or requirements related to brokerage windows could have an adverse effect on the ability of plan sponsors to offer brokerage windows to their employees and, consequently, could reduce both plan participation and sponsorship.

The letter was a response to EBSA’s August 20 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.” 

The Council’s letter suggests that DOL undertake a deliberate approach to determining whether additional guidance is necessary, noting specifically:

The Department should maintain the current regulatory definition of “brokerage window,” as distinguished from “designated investment alternatives.”  

  • Brokerage windows are important tools that allow plan sponsors to meet the needs of participants. Any new guidance should not discourage their use in meeting participants’ and plan sponsors’ needs and aiding greater retirement savings.
  • The imposition of greater fiduciary responsibilities to monitor and evaluate brokerage window investments and provide additional investment-specific disclosures, beyond the existing requirements, would be unworkable for plan sponsors.
  •  Plan sponsors would benefit from additional guidance on how a fiduciary can liquidate one or more brokerage window investments without the risk of fiduciary liability or close access to a brokerage window without running afoul of the nondiscrimination rules under the Internal Revenue Code. 
  • Any new guidance or requirements of plan sponsors with respect to brokerage windows must not produce unintended consequences for other types of plans or accounts that use a brokerage window or similar feature, such as SEP and SIMPLE plans.

As we previously reported, the 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. For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.



EBSA Issues Updated Guidance for Compliance with PPACA, Mental Health Parity Rules

The Employee Benefit Security Administration (EBSA) of the U.S. Department of Labor (DOL) released an updated version of its Compliance Assistance Guide – Health Benefits Coverage Under Federal Law on November 19. This document, designed to help sponsors and issuers of health insurance coverage comply with current law, was updated to reflect changes attributable to the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

The MHPAEA prohibits large employer and group health plans that provide medical and surgical benefits and mental health or substance use disorder benefits from applying financial requirements or quantitative treatment limitations (such as a limit on the number of outpatient visits or inpatient days covered) that are more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical and surgical benefits. Final regulations, released in November 2013, apply to plan and policy years (for grandfathered and non-grandfathered plans) beginning on and after July 1, 2014 (January 1, 2015, for most calendar year plans).

The guide includes general descriptions of the various health care laws and frequently asked questions, self-compliance tools and tips, charts summarizing the notices a plan must provide and model notices. The November 19 update reflects changes to the mental health parity portion of the self-compliance tool section and the mental health parity provisions “questions and answers” section.

For more information on mental health parity issues, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.



The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).