consensus among a slew of comment letters on the Department of Labor's request
for information on standards for brokerage windows in participant-directed
individual account plans is: More guidance isn't necessary.
guidance from the DOL's Employee Benefits Security Administration already is
sufficient, and any more guidance could re-introduce concerns that the agency
has already addressed, financial organizations and business groups said in
letters submitted by the Nov. 19 comment deadline.
Groups offered suggestions on how the DOL could proceed with guidance if it decides to do so, such as by providing safe harbors, offering clearer definitions of the term brokerage window as used in defined contribution plans and establishing small plan exceptions for self-directed-only brokerage accounts.
issued its request for information (RIN 1210-AB59) in August, and asked for
information on the prevalence and role of brokerage windows in
participant-directed individual account plans, and whether regulatory standards
or other guidance concerning the use of brokerage windows would be necessary to
adequately protect participants' retirement savings.
“brokerage window” has a broad definition. For example, the Financial Services
Roundtable said, “While the term brokerage window refers to a program or
procedure whereby the participants” in a defined contribution plan (DCP) “are
afforded access to investment options that are not ‘designated investment
alternatives'—that is, core investment funds offered under a DCP to afford
participants investment choices that offer a mix of alternatives with divergent
risk profiles, there is no standard program or process associated with such
The DOL also said in 2012 in a revised field assistance bulletin on brokerage windows and similar arrangements that plan fiduciaries are still bound by the Employee Retirement Income Security Act's fiduciary requirements of prudence and loyalty to participants and beneficiaries.
Securities Industry and Financial Markets Association suggested a definition of
“open brokerage window” if the DOL decides one is needed: “An investment option
under an individual account plan that generally permits a participant to invest
in any investment option available on the brokerage window provider's platform;
provided that the investment options which participants are permitted to invest
in may be limited by the plan sponsor.”
Schwab & Co. said that there are two distinct models from which employers
can choose when using a self-directed brokerage window in defined contribution
is when employers offer the brokerage window as a plan feature, and the second
is where plan sponsors adopt a brokerage window-only approach for plan
should consider reviewing and defining ‘brokerage window' in a bifurcated
manner,” the investment firm said. “The first would be defining brokerage
window as a feature added to a plan following review and a determination by the
plan sponsor. Schwab encourages the DOL to review the obligations that are in
place today for plan sponsors in making this feature available.”
the second type of window, the firm said that the DOL should review and analyze
the use of brokerage windows as an overall plan design rather than as an
optional feature elected by plans.
further said that the DOL should work closely with service providers and plan
sponsors to identify obligations that wouldn't be overly burdensome and costly.
Fidelity Investments said that ERISA excludes brokerage windows, self-directed brokerage accounts and similar plan arrangements from its participant disclosure requirements applicable to designated investment alternatives, but doesn't define those terms. If the DOL decides to develop more regulations in this area, it will need to provide a more specific definition of the types of arrangements that are treated as brokerage windows, the brokerage firm said.
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