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Interest in Brokerage Window-Only Plans To Depend on Election Results, Attorney Says

Tuesday, August 21, 2012

If President Obama wins a second term, Department of Labor officials will address their concerns about brokerage windows, at least with respect to Section 401(k) plans that offer a brokerage window and no other selected investments, a benefits attorney told BNA Aug. 20.

“They appear to be questioning whether it is a violation of fiduciary duty to offer a brokerage window-only plan,” said Bradford P. Campbell, counsel at Drinker Biddle & Reath in Washington. Campbell was DOL assistant secretary at the Employee Benefits Security Administration under President George W. Bush.

Campbell said he is unaware of problems created by brokerage-window-only plans that would justify DOL's interest. “Brokerage-window-only plans are a perfectly appropriate plan design,” he said.

Until three months ago, when the department issued Field Assistance Bulletin 2012-02 (95 PBD, 5/17/12; 39 BPR 969, 5/22/12), DOL itself had not raised concerns about brokerage windows during several years of notice-and-comment rulemaking, Campbell said. DOL mentioned those concerns again in a revised FAB 2012-02R (146 PBD, 7/31/12; 39 BPR 1473, 8/7/12).

“If [presumptive Republican presidential nominee Mitt] Romney wins, I think this issue goes away unless there is evidence of an actual problem in need of a solution,” Campbell said. “So far, DOL has not made its case,” he said.

Percentage of Brokerage Windows.

Brokerage windows are features in less than about one out of 10 Section 401(k) plans, according to a quick analysis of filings in DOL's Form 5500 series database, an employee of the financial information company BrightScope told BNA Aug. 20.

Slightly less than 8 percent of 401(k) plans offer brokerage windows, said Brooks Herman, the head of research at BrightScope. Nearly 8 percent, or 50,350 Form 5500 series plan filings for 2010, display a 2R code, Herman said. The 2R code on a filing indicates that the plan has a brokerage window.

DOL's Form 5500 series database contains 643,747 401(k) plan filings for 2010, Herman said. The plans with the largest amount of net assets “have a slightly higher occurrence of a brokerage window” than do smaller plans, he added.

By Florence Olsen  

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