DOL Replaces Q&A 30 Regarding Use of Brokerage Windows
NEWS
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to CMS Due Soon - HIPAA Privacy Notice Reminder
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- Notice Regarding Changes to Certain Written Communications
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- The Pension Funding Equity Act of 2004; Internal Revenue Service Notice 2004–34 and Announcement 2004–38
On Monday, July 30, 2012 the DOL replaced Q&A 30 with a new Q&A 39, and reissued FAB 2012-02 as FAB 2012-02R. In the new Q&A 39, the DOL makes it clear that a platform or a brokerage window, self-directed brokerage account, or similar plan arrangement in an individual account or DC plan is not a designated investment alternative ("DIA"). The DOL, however, restated its position that: The DOL further stated that it intends to engage in discussions with various interested parties "to help determine how best to assure compliance with these duties in a practical and cost effective manner, including, if appropriate, through amendments of relevant regulatory provisions." What does this mean? First, a fiduciary seeking to avoid regulatory disclosure obligations by funneling all plan investments through a brokerage window might be wise to rethink that strategy. Second, fiduciaries of ERISA-subject individual account or DC plans have, and always have had, a duty to select prudently the investment alternatives made available under the plan, to monitor the performance of those investment alternatives, and to make adjustments where necessary. Thus, the decisions to include a particular type of investment (e.g., mutual funds, annuities or a brokerage window), and to select a particular service provider, fund or other investment option, must be prudent ones. This does not that mean a fiduciary must make the best possible choice. Rather, it means that a fiduciary must engage in a deliberative process when choosing the types of investments, the service providers and the funds made available to participants. — MATTHEW L. GOUAUX
We reported in our July issue that the Department of Labor ("DOL") had issued a Field Assistance Bulletin (FAB 2012-02) which suggested that:
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