On August 20, 2014, the U.S. Department of Labor’s (“DOL”) Employee Benefits Security Administration announced that it is requesting information on the use and prevalence of brokerage windows in 401(k) and similar plans.

Brokerage windows are a common feature in defined contribution plans (most commonly 401(k) plans).  They allow participants to choose investment options beyond those selected and monitored by a plan fiduciary.  Brokerage windows are popular amongst participants and plan sponsors as they enable participants to build more customized and diversified investment portfolios.

The DOL’s Request for Information (“RFI”) is intended to “assist the Department in determining whether, and to what extent, regulatory standards or safeguards, or other guidance, are necessary to protect participants’ retirement savings.”  Specifically, the RFI asks interested parties to provide information to answer 39 questions concerning the

  • Scope of investment options available;
  • Types of individuals who participate;
  • Process used to select a brokerage window and provider;
  • Fiduciary oversight;
  • Costs;
  • Role of advisers; and
  • Disclosure of information and options to participants.

The DOL’s focus on brokerage windows could result in regulations that will have an impact on large numbers of defined contribution plans.  If past experience is any indicator, the ensuing regulations may prove onerous for plan sponsors and fiduciaries, and may serve to curtail participant choice in investing.

Comments are due to the DOL by November 19, 2014.