DOL issues RFI for guidance on brokerage windows in retirement plans

The Department of Labor issued a request for information to determine whether it should issue additional regulations and/or guidelines for brokerage windows in retirement accounts covered by the Employee Retirement Income Security Act.

“The use of brokerage windows and similar arrangements by participant-directed individual account retirement plans, such as 401(k) plans, raises important issues concerning ERISA’s reporting and disclosure requirements, as well as ERISA’s fiduciary standards,” said a DOL document describing the RFI.

A formal RFI will be published Thursday in the Federal Register, and it will provide for 90 days of public comment.

“The Department wants to make sure that participants are not exposed to undue risks from brokerage windows and that plan fiduciaries properly understand the scope of their ongoing responsibilities with respect to brokerage windows,” the RFI said.

Some DC plans offer brokerage windows as additional investment choices “beyond those specifically designated by the plan,” the RFI said. “In some cases, the brokerage window may be offered in place of any designated investment options.”

The RFI pointed out that current regulations say investments offered through brokerage windows are not “designated investment alternatives.” That means plan administrators “are not required to disclose the detailed performance, fee and other investment-related information” as they would for investments specifically designated by plans such as a qualified default investment alternative and a core menu of investments, the RFI said.

Current regulations require plan administrators to provide some information about brokerage windows, such as “an explanation of fees and expenses that may be charged against an individual account … rather than on a plan-wide basis,” the RFI said.

Also, current regulations call for plan administrators to provide a description of the brokerage window and to give participants “a statement of the dollar amount of the fees and expenses charged to their accounts…during the previous quarter.”

The RFI is available here.