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Department of Labor Takes Another Look at Brokerage Windows


By: 
Date: September 10 2012

On July 30, 2012, the U.S. Department of Labor (DOL) published Field Assistance Bulletin (FAB) 2012-02R in which it substantially relaxed its previous position on the disclosure requirements under ERISA that apply to “brokerage windows,” “self-directed brokerage accounts,” and other similar arrangements (collectively, a “brokerage window”) in a participant-directed individual account plan (e.g., a 401(k) plan). Specifically, the DOL, after heavy criticism from various plan sponsor groups and financial services organizations, withdrew earlier guidance that imposed duties on plan fiduciaries to provide the same investment-related information for investment funds in a brokerage window as is required for the plan’s designated investment alternatives (DIAs). While FAB 2012-02R confirms that brokerage windows are not DIAs, the revised guidance reiterates that retirement plan fiduciaries are bound by their fiduciary duties under ERISA to take into account the nature and quality of the services provided in connection with any brokerage window offered under their 401(k) or other defined contribution plans. Additionally, the DOL indicated that it intends to engage in continued discussions with interested parties to determine how best to ensure compliance with those fiduciary duties, including through the possible issuance of future regulations.
The Aon Hewitt bulletin, which provides additional details on FAB 2012-02R, is available here.   
The DOL FAB 2012-02R (released July 30, 2012) is available here.  
 
The DOL FAB 2012-02 (released May 7, 2012) is available here.  
Aon Hewitt’s report, “New FAQs Provide Participant Fee Disclosure Guidance,” which was updated in September 2012 to reflect the guidance in FAB 2012-02R, is available here



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