DoL Proposal Would Limit Investment Advice

The Department of Labor proposed new investment advice rules for 401(k) plans and IRAs under the Pension Protection Act. The new proposal scales back previous proposals by only allowing investment advice pursuant to unbiased computer-based models and where product sponsors do not benefit financially by the advice given (aka “fee-leveling”). The proposal dispensed with an exception that would have allowed deviation from computer-based advice where impractical (e.g. brokerage options). The DoL proposal imposes significant compliance burdens including annual audits, disclosure, and recordkeeping. Comments are due May 5.

OUR TAKE: The DoL and/or the Administration has discomfort allowing investment advice to plan participants if there is any possibility that the advice-giver could benefit. As a result, plans (and participants) will likely have to pay third party advice providers if they want help.

http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23559&AgencyId=8&DocumentType=1