DOL Opposes Easing Advice Restrictions

September 18, 2000 ( - Acting Assistant Secretary of Labor Leslie Kramerich says recent attempts to lower restrictions on offering investment advice to plan participants are not needed, and could be harmful.

However, she did say the Labor Department was open to looking at ways to overcome those barriers, while protecting participants.

In a speech at the 2000 Los Angeles Benefits Conference, Kramerich, who heads the department’s Pension and Welfare Benefits Administration, also said that simply telling participants the source of the investment advice would not overcome the conflicts of interest inherent in that structure.

She did acknowledge that concerns about fiduciary liability might be keeping some employers from offering advice, but said that the department believes that current law affords employers “considerable flexibility” in responding to participant advice needs.

Kramerich noted that the Labor Department’s Interpretive Bulletin 96-1 made it clear that designating a person to provide investment advice to pension plan participants would not, in itself, give rise to liability for losses resulting from an individual participant’s investment decision.

She also described as “phenomenally troubling” any attempt to constrain PWBA’s oversight responsibilities with regard to employee pension plans, according to BNA Pension & Benefits Daily.

Kramerich acknowledged that many workers need investment advice, since they have little/no background in complex investment concepts.

She also said:

  • designating a person to provide investment advice does not, in and of itself, give rise to liability for losses resulting from the participant’s investment decisions.
  • employers are not liable for acts of investment advisors. However, they are responsible for the prudent selection and monitoring of the advisor(s), as they are with any service provider.

She also made clear that the department expects that fiduciaries will be prudent in their selection of advisors – and will periodically review those choices.

– Nevin Adams