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“In the short-term, this [revised FAB] certainly addresses the issues the Department of Labor created,” said Bradford Campbell, counsel, Drinker Biddle & Reath LLP’s Employee Benefits & Executive Compensation Practice Group, and EBSA’s former assistant secretary of labor. “They stopped trying to write regulatory language into a guidance document.”However, Campbell said he is still concerned about one sentence in the revised FAB: “Nonetheless, in the case of a 401(k) or other individual account plan covered under the regulation, a plan fiduciary's failure to designate investment alternatives, for example, to avoid investment disclosures under the regulation, raises questions under ERISA section 404(a)'s general statutory fiduciary duties of prudence and loyalty" (see "DOL Issues Clarification to Participant Fee Disclosure Guidance"). This sentence suggests that an entire plan design—a brokerage window-only design—may not be appropriate according to the DOL, Campbell said. He added that the original regulation did not require a plan to have a certain number of designated investment alternatives (DIAs), but the FAB suggests that if a plan does not, it raises fiduciary questions. “With respect to a plan that has a robust menu and a brokerage window, I don’t think anything has changed,” he said, but brokerage window-only plans could run into trouble in the future. This may be DOL’s “warning shot,” he noted. Roberts agrees that the DOL may be more closely monitoring these types of plans. “It tells me they’re going to look into the decisions made around those options,” he said. FAB 2012-02R is available at http://www.dol.gov/ebsa/regs/fab2012-2R.html.
“In the short-term, this [revised FAB] certainly addresses the issues the Department of Labor created,” said Bradford Campbell, counsel, Drinker Biddle & Reath LLP’s Employee Benefits & Executive Compensation Practice Group, and EBSA’s former assistant secretary of labor. “They stopped trying to write regulatory language into a guidance document.”
However, Campbell said he is still concerned about one sentence in the revised FAB: “Nonetheless, in the case of a 401(k) or other individual account plan covered under the regulation, a plan fiduciary's failure to designate investment alternatives, for example, to avoid investment disclosures under the regulation, raises questions under ERISA section 404(a)'s general statutory fiduciary duties of prudence and loyalty" (see "DOL Issues Clarification to Participant Fee Disclosure Guidance").
This sentence suggests that an entire plan design—a brokerage window-only design—may not be appropriate according to the DOL, Campbell said. He added that the original regulation did not require a plan to have a certain number of designated investment alternatives (DIAs), but the FAB suggests that if a plan does not, it raises fiduciary questions.
“With respect to a plan that has a robust menu and a brokerage window, I don’t think anything has changed,” he said, but brokerage window-only plans could run into trouble in the future. This may be DOL’s “warning shot,” he noted.
Roberts agrees that the DOL may be more closely monitoring these types of plans. “It tells me they’re going to look into the decisions made around those options,” he said.
FAB 2012-02R is available at http://www.dol.gov/ebsa/regs/fab2012-2R.html.
Corie Russelleditors@plansponsor.com