Department Of Labor Exempts Brokerage Window For Now But May Resurrect Later In More Formal Language

Tuesday, July 31, 2012 06:51
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Department Of Labor Exempts Brokerage Window For Now But May Resurrect Later In More Formal Language

Tags: fiduciaries | mutual funds | retirement plans

By August 30, plan sponsors will have to disclose fees for investments chosen within 401(k) plans. A directive from the Department of Labor sent out in May says that plan sponsors will bear more responsibility for the investments employees choose within the self-directed retirement plans.

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The investments offered within such plans are labeled designated investment alternatives. Investments available through brokerages have not been included in that group and so, have been considered outside the fee-disclosure provision.
 
But the bulletin issued in May indicated that such investment options could become designated investment alternatives if enough employees in a plan select them. Fiduciaries are charged with monitoring investment options available in retirement plans.
 
However, the DoL on Monday July 30 clarified its position, saying that investments chosen outside the core plan options, i.e., through brokerage accounts, would not be included as designated investment alternatives despite the number of employees who choose them.
 
This may not be the final word on the issue, however. The DoL could revisit the so-called brokerage window and restate the provision. Meanwhile, it might be advisable for plan sponsors to prepare for just such a possibility since the DoL could simply be waiting to issue something more formal to address the brokerage window issue.

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