The Department of Labor has
issued a revised Field Assistance Bulletin 2012-12R, involving retirement plan
participant disclosures. The revised guidance replaces Q&A 30 with Q&A
39, which emphasizes that nothing in the Bulletin prohibits the use of a
brokerage window or self-directed brokerage account. In the view of SIFMA, the
original answer to Q. 30 would have changed well-established law and policy
regarding plan fiduciaries’ duties and impose new requirements with respect to
investment selection and monitoring in individual brokerage accounts. The
revised guidance replaces Q. 30 with Q 39, which, according to SIFMA,
emphasizes that nothing in the Bulletin prohibits the use of a brokerage window
or self-directed brokerage account.
After the initial issuance of
Field Assistance Bulletin 2012-12, Senator John Kerry (D-MA) and the securities industry
asked DOL to withdraw Q&A 30 and pursue this issue through a formal
rulemaking, which would allow for the appropriate level of public comment and
notice with respect to this element of the guidance. Their main concern was
that Q&A 30 did not provide interpretative guidance regarding the disclosure
obligations but rather set forth new rules that were not previously contained
in any previous DOL guidance. Specifically, Q&A 30 stated that plan
fiduciaries may have liability if they do not designate a manageable number of
investment alternatives and if they do not provide the regulatory disclosures
with respect to investments in which a significant number of participants are
invested through a brokerage window available under the plan.
While not expressing any
position regarding the substance of Q&A 30, Senator Kerry feared that the
lack of advanced warning and the inability of the regulated community to
comment will have serious unintended consequences for plans. With respect to
brokerage window investments, the general due date for disclosures may
technically be August 30. Senator Kerry noted that, due to the lack of advance
notice, a vast number of employers will not be able to comply in any way by the
August 30 deadline. The Senator had also become aware that many experts on
small business plans were concerned that these rules and potential liabilities
could result in the termination of many small business plans.
In its earlier letter, SIFMA
said that Q&A 30 would have created fiduciary consequences for plan
sponsors through the challenge they would
have faced in identifying or not identifying securities in brokerage
windows as designated investment alternatives. In this regard, SIFMA noted
that, heretofore, the fiduciary obligations associated with the construction of
an investment menu for a 401(k) plan have been viewed by most as limited to
ensuring that designated investment options are prudent, not whether they
include too many or too few choices.