Speaking also for the Council of Independent 401(k) Recordkeepers and the National Association of Independent Retirement Plan Advisors, ASPPA said the proposed regulation would provide needed clarity in terms of whether plans are receiving ERISA-covered investment advice.
“Disclosure is key for retirement plan fiduciaries,” ASPPA wrote in a statement. “They need to know whether the guidance they receive from their advisers is intended as ERISA-covered investment advice. The DOL proposal would be a significant step forward in achieving this goal.”
ASPPA and its two affiliated groups have made several suggestions to the DoL for improving the proposed regulation. Included in these recommendations is a suggestion about the type of information to be provided to recipients of advice in order for the “seller’s exception” to apply. “The seller’s exception provides that commission-based brokers/advisors are not fiduciaries if the person receiving the recommendations understands that they are not receiving impartial advice,” ASPPA said. “These brokers/advisers would be required to tell plan fiduciaries and participants that their interests were ‘adverse to the interests of the plan or its participants’.”
The three groups are recommending three items to be disclosed to advice recipients:
- That the broker/adviser is not acting as an ERISA fiduciary and thus the advice given is not afforded the protections of ERISA;
- That the broker/adviser’s advice may not be impartial since he or she is compensated by the provider of the investment options being considered and the amount of the compensation may be affected by the investments selected; and
- The amount of compensation the broker/adviser is reasonably expected to receive based on the investments selected, which ties into what will already have to be disclosed under the DOL’s new ERISA section 408(b)(2) regulations.