Brokerage accounts offered through defined contribution plans do not change sponsors' fiduciary responsibility, Phyllis Borzi, the Labor Department's top retirement official, said Monday.
“A plan fiduciary needs to prudently select and monitor a service provider. Once you choose a service provider, you can't just walk away,” Ms. Borzi, assistant secretary for the Employee Benefits Security Administration, told attendees at the SPARK Institute annual meeting in Washington.
Industry experts have criticized the Labor Department for a May 7 guidance document that discusses brokerage accounts and other elements of new rules affecting fee disclosure between sponsors and participants. They claim the document is breaking new regulatory ground that requires a formal review process. Ms. Borzi said her agency addressed brokerage windows in plans after finding “a disturbing trend” among plan sponsors seeking to avoid ERISA responsibility by “just giving choices.”
”It is hard for me to imagine that people could say with a straight face, 'This is new, we never knew,'” Ms. Borzi said. “It is entirely possible that people in the industry haven't been capturing that information, but if you're offering these choices, you can't just set it and forget it.”
Aug. 30 is the compliance deadline for the rules governing fee disclosure between sponsors and participants. Ms. Borzi said plan sponsors can take advantage of safe-harbor provisions that recognize good-faith efforts to comply with the new rules.
DOL also plans to issue more information on fee disclosure within a few weeks, Ms. Borzi said. “It's absolutely clear that people don't understand what they're paying for.”
