We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Modified Field Assistance Bulletin eliminates rule
calling for fund disclosures of investments available through
brokerage windows and other similar arrangements.
In early May, the U.S. Department of Labor (DOL) issued
guidance, in the form of "frequently asked questions"
(FAQs), on the plan participant disclosure rules under DOL
Regulation 404a-5 that come into effect at the end of August. The
guidance, contained in Field Assistance Bulletin (FAB) 2012-02,
raised a number of issues for open brokerage window arrangements.
Specifically, Q&A 30 discussed how the disclosure requirements
apply to investments that are made available through an investment
platform but are not specifically designated as investment options
under the plan, such as an open brokerage window or similar
arrangement. In response to concerns raised by the plan sponsor and
investment communities, DOL has now revised the FAB to withdraw the
more open-ended and controversial aspects of its guidance.
Background
Q&A 30 addressed an arrangement in which a plan offers to
its participants an investment platform of registered mutual funds,
but where the plan fiduciary who selected the platform does not
specifically designate any of the funds as "designated
investment alternatives" (DIAs) under the plan. The question
was whether the platform itself is a DIA for which specific
disclosures are required under the new rules. DOL concluded that a
platform consisting of multiple investment alternatives would not
itself be a DIA, but left open the issue of whether the investment
funds on the platform (or those available through the brokerage
window) should be treated as DIAs for purposes of the disclosure
rules. DOL also announced a safe-harbor rule for determining
whether the DIA disclosure rules would apply to investment funds on
a platform or brokerage window with more than 25 funds; the rule
required such disclosures for at least three funds on the platform.
This appeared to undermine the general rule of the DOL regulation
that the disclosure rules did not apply to investments available
through a brokerage window or similar arrangement.
In addition, Q&A 30 suggested a broader fiduciary diligence
and monitoring obligation over brokerage window investments than
had been indicated in any prior guidance. DOL said that if a
"significant number" of plan participants and
beneficiaries select non-designated investments that are available
through the brokerage window, "an affirmative obligation
arises on the part of the plan fiduciary to examine these
alternatives and determine whether one or more such alternatives
should be treated as designated for purposes of the [disclosure]
regulation."
Several industry groups requested additional guidance from DOL
on the meaning of the standards described in Q&A 30 through
letters and meetings. They urged the withdrawal of Q&A 30 and
reconsideration through an established rulemaking process, such as
a proposed regulation, if necessary.
Revised Field Assistance Bulletin
In response, on July 30, DOL issued a revised version of FAB
2012-02—now FAB 2012-02R—that replaces Q&A
30 with Q&A 39. In Q&A 39, DOL included its view that a
plan fiduciary's failure to designate DIAs to avoid the
disclosure requirements of the regulation would raise questions
under ERISA's general statutory fiduciary duties of prudence
and loyalty, and that, in connection with brokerage window
arrangements generally, fiduciaries are bound by ERISA's
fiduciary duties to "take into account the nature and quality
of services provided in connection with" the brokerage window.
However, there is no mention of a specific obligation to monitor
the investment funds available through the window or to treat any
of those funds as DIAs subject to new disclosure requirements.
DOL added that plan fiduciaries and service providers may have
questions about their general ERISA fiduciary duties apart from the
disclosure regulation, and that it intends to engage in discussions
with interested parties to determine how best to assure compliance
with those duties, including possibly through amendments of its
regulations. In an announcement, DOL said that its goal is to give
interested parties more time to engage in discussions with DOL on
"practical and cost effective ways" to ensure that plan
participants are protected by the ERISA fiduciary rules when using
brokerage windows.
While DOL has left open the possibility of further guidance on
how the ERISA fiduciary responsibility rules apply to brokerage
window arrangements, it has alleviated the immediate concerns as to
whether investment funds available through brokerage windows must
be covered in participant disclosure statements.
Copyright 2012. Morgan, Lewis & Bockius LLP. All Rights
Reserved.
This article is provided as a general informational service
and it should not be construed as imparting legal advice on any
specific matter.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
A female employee traveling for her employer met a "friend" and at her motel room with him became "injured whilst engaging in sexual intercourse when a glass light fitting above the bed was pulled from its mount and fell on her."
The Departments of Labor, Treasury, and Health & Human Services have issued new guidance on the content requirements for health plan summaries of benefits and coverage ("SBCs").
Groping, insulting, and threatening female employees has just resulted in an award by a federal jury in Tampa of $20.2 million in damages in an action which alleged a hostile work environment.
Issues After The Election
