(b)lines Ask the Experts – Effect of Revised Fee Disclosure Guidance

August 7, 2012 (PLANSPONSOR (b)lines) – “I was the individual who inquired back in May as to the impact of DOL FAB 2012-02 on our 403(b) plan, where we utilize two vendors who offer all of their proprietary investment options.

See “Ask the Experts – Participant Disclosure for Provider’s Entire Platform.”

“Now that the Q&A (#30) that related to my question has been withdrawn, do I need to be concerned from a fiduciary perspective regarding offering all of the proprietary funds of an investment provider or providers?”


Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:

Your new question is quite timely! On July 30th, the DOL indeed did amend the guidance in question, issuing a revised Field Assistance Bulletin (FAB) 2012-02R (see “DOL Issues Clarification to Participant Fee Disclosure Guidance”). The new FAB deleted the controversial Q&A 30 and replaced it with Q&A 39, which speaks to the general fiduciary responsibilities with respect to these accounts, but no longer states the possibility that “all-provider XYZ” arrays such as the ones you a referencing are imprudent on their face, and also retracted the position that brokerage windows (or their 403(b) counterpart, mutual fund windows) need be reviewed to determine “significant” usage of any particular investment for fee disclosure purposes.


However, at the conclusion of the revised guidance, the DOL stated the following:


“The Department understands plan fiduciaries and service providers may have questions regarding the situations in which fiduciaries may have duties under ERISA’s general fiduciary standards apart from those in the regulation. The Department intends to engage in discussions with interested parties to help determine how best to assure compliance with these duties in a practical and cost effective manner, including, if appropriate, through amendments of relevant regulatory provisions.”


Thus, fiduciaries should stay tuned for guidance that may address situations such as yours where a plan may offer 100+ proprietary funds with an investment provider or providers, and not stipulate designated investment alternatives from such arrays. In the interim, the language in our response to your question from May remains valid; namely, that you may wish to consider working with consultants and counsel well versed in such issues to determine whether offering hundreds of investments remains a prudent strategy from a fiduciary perspective. 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.