COLLECTED WISDOM™ on Participant and Investment Advice
Summary: The DOL recently issued a final regulation to enhance retirement security by improving workers' access to quality fiduciary investment advice. The regulation provides that any plan sponsor that prudently selects and monitors an investment adviser will not be liable for the investment advice provided by that adviser to plan participants/beneficiaries. This article is a detailed presentation of the regulatory information.
Source: McKay Hochman, April 2012
Summary: After several detours on the road to implementation, the U.S. Department of Labor has released its final regulation on participant investment advice. The final regulation, effective December 27, 2011, makes it clear that the DOL recognizes the benefits of participant advice programs, and is good news for both participants and plan sponsors.
Source: Vanguard 
, December 2011.
Summary: It is not uncommon for plans to offer general investment education, but these regulations describe arrangements that go a step further and provide individualized advice. This is an important difference, because providing investment education generally is not a fiduciary act, while providing advice for a fee is.
Source: Seyfarth Shaw LLP, December 2011.
Summary: Because of the onerous conditions imposed on the investment advice arrangements sanctioned by the Regulations, there appears to be little incentive for third-party service providers to establish these arrangements and for plan sponsors to engage these service providers to provide investment advice. Further reform is needed to encourage the proliferation of investment advice arrangements. The Regulations are effective December 27, 2011.
Source: Orrick, Herrington & Sutcliffe LLP, December 2011.
Summary: The industry is awash in information about participant advice and plan sponsor liability. Opinions vary widely and while well intended, much of this content is in reality misinformation. In short, the most pertinent questions remain unanswered. Do sponsors who facilitate or offer sponsor selected participant advice increase their liability? Additionally, if they do facilitate or provide participant advisory services, what are their duties and responsibilities as fiduciaries?
Source: Center for Due Diligence, April 2011.
Summary: The DOL has proposed a new regulation to re-define fiduciary investment advice. The proposal broadly expands the activities that result in fiduciary status by virtue of giving advice. In addition, it formalizes a long-standing DOL position that the referral of an investment manager can result in fiduciary status for the adviser making the referral. As a result, if a solicitor's fee or finder's fee is paid to the adviser who makes the referral, that payment can be a prohibited transaction.
Source: Drinker Biddle & Reath LLP, February 2011.
Summary: Charles Schwab released the findings of a new research study which reveals that professional advice has a direct and positive impact on the behavior of 401k plan participants.
Source: 401khelpcenter.com, September 2010.
Summary: How do you know if you are giving investment education or investment advice? In Interpretive Bulletin 96-1, The Department of Labor has given some of the best guidance on determining the difference between the two. Here is a summary of the most important points.
Source: 401khelpcenter.com, May 2010.
Summary: Lawmakers in Washington are discussing scrapping the conflicted-advice provision of the 401k Fair Disclosure and Pension Security Act of 2009, a move that would be welcomed by many in the financial services industry.
Source: Workforce.com (free registration may be required), November 2009.
Summary: Charles Schwab released data showing that 401k participants who receive some type of assistance with choosing their investment line-up, whether through advice services, target-date retirement funds, or plan-sponsored asset allocation models, receive a significantly greater rate of return than those who choose to go it alone.
Source: Charles Schwab , December 2007.
Summary: This is commonly called the SunAmerica opinion and deals with how financial services firms can provide asset allocation advice. It was issued before the Pension Protection Act of 2006 was passed by Congress.
Source: U.S. Department of Labor, December 2001.
Summary: This interpretive bulletin sets forth the views of the Department of Labor (the Department) concerning the circumstances under which the provision of investment-related information to participants and beneficiaries in participant-directed individual account pension plans will not constitute the rendering of "investment advice" under ERISA. This guidance is intended to assist plan sponsors, service providers, participants and beneficiaries in determining when activities designed to educate and assist participants and beneficiaries in making informed investment decisions will not cause persons engaged in such activities to become fiduciaries with respect to a plan by virtue of providing "investment advice" to plan participants and beneficiaries for a fee or other compensation.
Source: U.S. Department of Labor , September 2003.
Summary: Fiduciary liability continues to be the primary reason most plan sponsors don't provide plan participants with investment advice, but are these concerns justified?
Located on: 401khelpcenter.com, April 2004.
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