EBSA Clarifies Investment Advice Regulations

August 21, 2008 (PLANSPONSOR.com) - Two proposed regulations released Thursday from the Department of Labor (DoL) include a model for advisers to satisfy the fee disclosure requirement for independent retirement account (IRA) and 401(k) investment advice.

The components of the  proposals clarify the Pension Protection Act (PPA) exemption for investment advice, according to the DoL.

The PPA had added an exemption that allowed participants of 401(k) plans and IRAs to receive investment advice by using an unbiased computer model or an adviser compensated on a "level-fee" basis.   After receiving comments since December 2006 about clarifying computer models and developing the model for the disclosure of adviser fees, the DoL released today's proposals.

In a telephone press conference Thursday, Bradford P. Campbell, assistant secretary of labor for Employee Benefits Security Administration at the DoL, said this is part of the continued efforts to protect participants from receiving investment advice from individuals with a vested interest in products.

Campbell said the proposal could this will open the window for more providers to offer investment advice—giving plans who can only afford a one-stop-shop service to be able to receive investment advice for their participants. The DoL expects advice available to participants to increase from 20% of participants to 60% of the participants.

"One of the most important elements of this proposal is we are facilitating one-on-one investment advice," Campbell said. "People find advice most valuable when it's being delivered face to face with another person, and these regulations facilitate that."