EBSA issues request for information on use of brokerage windows by individual account plans

The Employee Benefits Security Administration (EBSA) has issued a Request for Information (RFI) concerning regulatory standards for the use brokerage windows in participant-directed individual account plans. The RFI is designed to assist the Labor Department in determining whether, and to what extent, regulatory standards or other guidance concerning the use of brokerage windows by plans are necessary to protect participants’ retirement savings. Comments on the RFI must be submitted on or before November 19, 2014.

Retirement plans that allow participants to choose investments for their individual accounts typically offer a limited set of specific investment options, which are selected and monitored by a plan fiduciary. Some plans also offer brokerage windows, which enable participants to select investment options beyond those specifically designated by the plan fiduciary. In some cases, the brokerage window may be offered in place of any designated investment options. The use of brokerage windows and similar arrangements by participant-directed individual account retirement plans, such as 401(k) plans, raises important issues concerning ERISA’s reporting and disclosure requirements, as well as ERISA’s fiduciary standards.

Purpose of RFI

The purpose of the RFI generally is to increase the Labor Department’s understanding of the prevalence and role of brokerage windows in participant-directed individual account plans covered by ERISA. The DOL received a number of questions about brokerage windows following its issuance of final regulations on participant-level fee disclosures in 2012.” We promised employers and other plan sponsors and fiduciaries that we would look into the use of brokerage window features,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi in a news release.

Specifically, the RFI will focus on why, under what circumstances, and how often brokerage windows are offered and used in ERISA plans, and the legal and policy issues that relate to such usage. The Department wants to make sure that participants are not exposed to undue risks from brokerage windows and that plan fiduciaries properly understand the scope of their ongoing responsibilities with respect to brokerage windows. “The information received in response to this RFI will assist the Department in determining whether, and to what extent, regulatory standards or safeguards, or other guidance, are necessary to protect participants’ retirement savings,” according to the RFI.

The RFI contains a number of questions, including: the scope of investment options typically available through a window, demographic and other information about participants who commonly use brokerage windows, the process of selecting a brokerage window and provider for a plan, the costs of brokerage windows, and what kind of information about brokerage windows and underlying investment options typically is available and disclosed to participants. EBSA makes clear that respondents need not answer every question, but should identify, by its number, each question addressed. Interested persons also are encouraged to address any other matters they believe to be germane to the general topic of the RFI.

Source: EBSA Notice of Request for Information, 79 FR 49469, August 21, 2014.

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