On July 30, 2012, the U.S. Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2012-02R, which contains several revised FAQs providing guidance on issues related to final regulations for participant-level retirement plan fee disclosure, superseding an earlier set of FAQs released in FAB 2012-02 on May 7, 2012.
The original FAB provided that investment alternatives available through a brokerage window, self-directed brokerage account, or similar arrangement could be designated investment alternatives for purposes of the participant-level fee disclosure rules if a significant number of participants invested in the alternative. This would have required plans to monitor the investment selections of each individual participating in the brokerage window to determine whether the selections met the significant number threshold.
Numerous practitioners and groups within the employee benefits industry reached out to the DOL requesting that the rule be withdrawn because such a rule should be subjected to a notice and comment period. In response, the DOL issued FAB 2012-02R, which clarifies that an investment platform offered under a plan that includes a brokerage window, self-directed brokerage account or similar plan arrangement is not a designated investment alternative for purposes of the participant-level fee disclosures under ERISA if the plan has not previously included any of the underlying investments in the arrangement as a designated investment alternative. Therefore, plan fiduciaries are not required to make disclosures under the regulation for these investment platforms.
The DOL issued a couple of cautions for fiduciaries to plans that do not contain any designated investment alternatives. The DOL stated that failure to designate investment alternatives in order to avoid the investment disclosures under the fee disclosure rules “raises questions under ERISA Section 404(a)’s general statutory fiduciary duties of prudence and loyalty.” The DOL also emphasized that fiduciaries continue to be bound by such duties with respect to participants who invest through the brokerage window, self-directed brokerage account, or similar arrangement.
Fiduciaries of plans with brokerage windows will likely welcome the revised guidance from the DOL, but fiduciaries should take care that they have met and will continue to meet their statutory fiduciary duties with respect to participants and beneficiaries who invest through the brokerage window for their plans.