DoL Clears Use of 'Profile" Prospectuses

September 12, 2003 ( - Plan sponsors can satisfy their 404(c) fiduciary responsibilities to provide 401(k) participants with investment information through summary "profile" prospectuses rather than the more detailed version, federal officials announced.

>The US Department of Labor’s Employee Benefits Security Administration (EBSA) issued an advisory opinion approving use of the “profile” mutual fund prospectuses for use with participants who make their own fund choices.

“It is the view of the (DoL) that, under  404(c)  regulations, the term ‘prospectus’ includes a profile,” wrote Louis Campagna, chief of the Division of Fiduciary Interpretations. “The (DoL) believes that the delivery of a profile by an identified plan fiduciary or designee to plan participants or beneficiaries satisfies the requirements of the 404(c) regulations because it provides a clear summary of key information about a mutual fund that is useful to such participants and beneficiaries.”

>Ann Combs, assistant secretary for EBSA, said in a statement announcing the advisory opinion’s release that the shorter summary “fact sheets” are good because they may encourage K plan investors to go through the provided material before choosing their funds.

“The availability of profile prospectuses to section 404 (c) participants will make it more likely that potential investors will actually read about the funds in which they invest and will lead to more informed investment decisions by plan participants,” said Combs.

>The rules governing the format and content of “profile” prospectuses are laid out by the US Securities and Exchange Commission.   In general, a profile prospectus is intended to provide investors with clear and concise information about mutual funds in a format that is designed to communicate information effectively, while avoiding the often confusing technical and legal terms generally associated with the traditional prospectus, the EBSA said.

>However, the opinion said plan sponsors are still required to hand over the more detailed formal prospectus if participants request it.

Advisory Opinion No. 2003-11A is available at .