Prior to the passage of the Pension Protection Act, insurance companies and others could provide certain non-tailored information to plan participants and beneficiaries under a safe harbor issued by the Labor Department but could not provide particularized information without being exposed to potential fiduciary liability under ERISA. The Pension Protection Act makes a person providing such advice a fiduciary under ERISA but relieves such person of potential liability under the prohibited transaction rules of ERISA, if certain requirements are met.
On January 21, 2009, the Department published final investment advice regulations providing general guidance with respect to the statutory exemption’s requirements. The regulations were originally to be effective March 23, 2009. However, on January 20, 2009, the Obama Administration requested all Agency Heads to consider extending for 60 days the effective date of all regulations published in the Federal Register that had not yet become effective. In response to this request, the Department delayed the effective date of its investment advice regulations until May 22, 2009. The Department further delayed the effective date of the regulations until November 18, 2009 to allow for the review of additional comments that were received.
On the legislative front, the House Subcommittee on Health, Employment, Labor and Pensions considered a bill (H.R. 1988) that would revoke the investment advice legislation contained in the Pension Protection Act and require investment advice to plan participants be provided only by independent investment advisers, as defined in the legislation. The bill was reported to the House Committee on Education and Labor on June 17, 2009 for its consideration.
The prospects for this legislation are unclear, as is what the final rules for the provision of investment advice to plan participants and beneficiaries will be.