Request for Information Regarding Standards for Brokerage Windows in Participant-Directed Individual Account Plans, 49469-49473 [2014-19832]
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Federal Register / Vol. 79, No. 162 / Thursday, August 21, 2014 / Proposed Rules
hearing itself would include the
presentation of testimony, crossexamination of witnesses, and the
introduction of exhibits, by both parties
(5 U.S.C. 556(d)). A hearing transcript
would be created, and ultimately, OSHA
would have the burden of proof (5
U.S.C. 556(d)). At the conclusion of any
hearing, participants in the hearing
would have the opportunity to submit
proposed findings, along with
supporting reasons and any additional
data, views, or argument, within a
period of thirty days (29 CFR 1902.19
and 1902.40(c)(6)).
Assuming Arizona does not waive the
tentative decision, the Assistant
Secretary will issue a tentative decision,
on the basis of the whole record, either
approving or disapproving the state’s
statute (29 CFR 1902.21). This tentative
decision will include a statement of the
findings and conclusions that form the
basis of this decision and it will be
published in the Federal Register (29
CFR 1902.21). Interested persons
participating in the hearing would then
have the opportunity to file exceptions,
and objections to those exceptions. Any
exceptions must be filed within thirty
days of the tentative decision, and the
objections within a period of time set
forth in the tentative decision (29 CFR
1902.22). Subsequently, the Assistant
Secretary will issue a final decision
ruling on each exception and objection
and publish such decision in the
Federal Register (29 CFR 1902.22–23).
This publication of the final decision in
the Federal Register may also include
the Assistant Secretary’s decision on the
continuation or revocation of the
Arizona State Plan’s affirmative 18(e)
determination, per 29 CFR 1902.52–53,
or the two decisions may be issued on
a staggered basis. If the Assistant
Secretary’s decision is to revoke the
affirmative 18(e) determination, the
Federal Register notice containing that
decision will also reflect the Assistant
Secretary’s determination that
concurrent Federal enforcement and
standards authority will be reinstated
within Arizona for a reasonable time
until the Assistant Secretary has either
withdrawn approval, or partial
approval, of the plan pursuant to 29
CFR 1955, or has determined that
Arizona has once again met criteria for
final approval under section 18(e), (29
CFR 1902.52).
Pursuant to the regulations cited
above, modifying the Arizona State
Plan’s status from final to initial
approval would give OSHA concurrent
enforcement authority in Arizona,
including independent Federal or joint
state and Federal inspections resulting
in issuance of appropriate Federal
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citations. However, modifying Arizona’s
final approval status would not
immediately affect Arizona’s basic plan
approval and would not eliminate
Arizona’s legal authority to enforce state
occupational safety and health
standards. Pending a final decision in
the proceeding instituted today, OSHA
will continue to exercise Federal
authority over safety and health issues
excluded from the scope of coverage of
the State Plan; monitoring inspections
including accompanied visits; and other
Federal authority not affected by the
June 20, 1985 final approval decision.
Authority and Signature
David Michaels, Ph.D., MPH,
Assistant Secretary of Labor for
Occupational Safety and Health, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210
authorized the preparation of this
notice. OSHA is issuing this notice
under the authority specified by Section
18 of the Occupational Safety and
Health Act of 1970 (29 U.S.C. 667),
Secretary of Labor’s Order No. 1–2012
(77 FR 3912), and 29 CFR parts 1902,
and 1953.
Signed at Washington, DC, on August 13,
2014.
David Michaels,
Assistant Secretary of Labor for Occupational
Safety and Health.
[FR Doc. 2014–19781 Filed 8–20–14; 8:45 am]
BILLING CODE 4510–26–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Parts 2520 and 2550
RIN 1210–AB59
Request for Information Regarding
Standards for Brokerage Windows in
Participant-Directed Individual
Account Plans
Employee Benefits Security
Administration, Department of Labor.
ACTION: Request for information.
AGENCY:
The Employee Benefits
Security Administration of the U.S.
Department of Labor (the Department) is
publishing this Notice as part of its
review of the use of brokerage windows
(including self-directed brokerage
accounts or similar arrangements) in
participant-directed individual account
retirement plans covered by the
Employee Retirement Income Security
Act of 1974 (ERISA). Some plans offer
participants access to brokerage
windows in addition to, or in place of,
SUMMARY:
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49469
specific investment options selected by
the plans’ fiduciaries. Through these
arrangements, plan participants may be
able to choose among the full range of
investment options available in the
investment marketplace. The Request
for Information contained in this Notice
will assist the Department in
determining whether, and to what
extent, regulatory standards or other
guidance concerning the use of
brokerage windows by plans are
necessary to protect participants’
retirement savings. It also will assist the
Department in preparing any analyses
that it may need to perform pursuant to
Executive Order 12866, the Paperwork
Reduction Act, and the Regulatory
Flexibility Act.
DATES: Comments must be submitted on
or before November 19, 2014.
ADDRESSES: You may submit written
comments to any of the addresses
specified below.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: e-ORI@dol.gov. Include RIN
1210–AB59 (Brokerage Windows RFI) in
the subject line of the message.
• Mail: Office of Regulations and
Interpretations, Employee Benefits
Security Administration, Room N–5655,
U.S. Department of Labor, 200
Constitution Avenue NW., Washington,
DC 20210, Attention: ‘‘Brokerage
Windows RFI.’’
All submissions received must
include the agency name and Regulation
Identifier Number (RIN) for this
rulemaking. Comments received will be
posted without change to https://
www.regulations.gov and https://
www.dol.gov/ebsa, and made available
for public inspection at the Public
Disclosure Room, N–1513, Employee
Benefits Security Administration, 200
Constitution Avenue NW., Washington,
DC 20210, including any personal
information provided. Do not include
any personally identifiable information
(such as name, address, or other contact
information) or confidential business
information that you do not want
publicly disclosed. Comments posted on
the Internet can be retrieved by most
Internet search engines. Comments may
be submitted anonymously. Persons
submitting comments electronically are
encouraged not to submit paper copies.
All comments will be made available to
the public.
FOR FURTHER INFORMATION CONTACT:
Kristen Zarenko, Office of Regulations
and Interpretations, Employee Benefits
Security Administration, (202) 693–
8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
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A. Background
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Retirement plans that allow
participants to choose investments for
their individual accounts typically offer
a limited set of specific investment
options, which are selected and
monitored by a plan fiduciary. Some
plans also offer brokerage windows,
which enable participants to select
investment options beyond those
specifically designated by the plan
fiduciary. In some cases, the brokerage
window may be offered in place of any
designated investment options. 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.
The Department addressed disclosure
requirements for brokerage windows in
a regulation requiring plan
administrators to disclose certain plan
and investment-related information to
participants and beneficiaries in
participant-directed individual account
plans (the ‘‘participant-level disclosure
regulation’’).1 This regulation was
intended to ensure that all participants
and beneficiaries in such plans have the
information they need to make informed
decisions about the management of their
individual accounts and the investment
of their retirement savings. To that end,
the regulation requires that, at least
annually, participants and beneficiaries
are furnished a comparative chart (or
similar format) that contains
information about the plan’s
‘‘designated investment alternatives.’’
Plan administrators must, for example,
furnish fee, historical performance, and
comparative benchmark information for
each designated investment alternative.
The regulation expressly provides that
brokerage windows are not ‘‘designated
investment alternatives.’’ 2 As a result,
plan administrators are not required to
disclose the detailed performance, fee,
and other investment-related
information required with respect to
1 75 FR 64910 (Oct. 20, 2010), codified at 29 CFR
2550.404a–5, and including conforming changes to
the Department’s ‘‘404(c) regulation’’ relating to
plans that allow participants to direct the
investment of their individual accounts, at 29 CFR
2550.404c–1.
2 The regulation defines a ‘‘designated investment
alternative’’ to mean: ‘‘[A]ny investment alternative
designated by the plan into which participants and
beneficiaries may direct the investment of assets
held in, or contributed to, their individual accounts.
The term ‘‘designated investment alternative’’ shall
not include ‘brokerage windows,’ ‘self-directed
brokerage accounts,’ or similar plan arrangements
that enable participants and beneficiaries to select
investments beyond those designated by the plan.’’
29 CFR 2550.404a–5(h)(4) (emphasis added).
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‘‘designated investment alternatives.’’
Instead, plan administrators must
provide ‘‘a description of any ‘brokerage
windows,’ ‘self-directed brokerage
accounts,’ or similar plan arrangements
that enable participants and
beneficiaries to select investments
beyond those designated by the plan.’’ 3
In addition, the plan administrator must
provide an explanation of any fees and
expenses that may be charged against an
individual account, on an individual,
rather than on a plan-wide, basis, in
connection with the arrangement.
Finally, participants must be furnished
a statement of the dollar amount of the
fees and expenses charged to their
accounts in connection with the
arrangement during the previous
quarter.4
Following publication of the
participant-level disclosure regulation,
plan sponsors and administrators raised
a number of questions about the
regulation, including how it applied to
brokerage windows. These questions
concerned both the required disclosures
for brokerage windows as well as other
fiduciary obligations that may arise
when a plan offers a brokerage window.
In response, the Department provided a
series of ‘‘frequently asked questions’’
about the participant-level disclosure
regulation. These questions and answers
were published in Field Assistance
Bulletin 2012–02R (FAB).5 FAB
Question 13 describes the information
about brokerage windows that must be
furnished to participants and
beneficiaries in order to satisfy section
(c)(1)(i)(F) of the regulation, which
requires a ‘‘description’’ of the
brokerage window. The FAB lists
specific information requirements,
including instructions for participants
on how to use the plan’s brokerage
window, any restrictions on trading
within the brokerage window, and fees
and expenses that may be charged in
connection with using the brokerage
window (e.g., annual fees for using the
brokerage window feature, brokerage or
other commissions for trades within the
brokerage window).
FAB Question 39 6 clarifies that a
brokerage window is not itself a
3 29
CFR 2550.404a–5(c)(1)(i)(F).
CFR 2550.404a–5(c)(3)(ii)(A).
5 https://www.dol.gov/ebsa/regs/fab2012-2R.html.
6 The original version of the FAB, which was
rescinded and replaced by FAB 2012–02R, included
Question 30, which some viewed as raising the
possibility that plan fiduciaries could be
responsible under ERISA for the underlying
investments into which participants invest through
a brokerage window. Further, some plan sponsors
and service providers stated that the Department
should not have issued Question 30 without prior
notice and opportunity for public comment.
Although the Department disagreed, it withdrew
4 29
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‘‘designated investment alternative’’
under a plan. The Department also
explains in Question 39 that a plan
fiduciary’s failure to designate
investment alternatives, for example, by
offering no menu of core investment
options other than a brokerage window
to avoid the regulation’s investmentrelated disclosure requirements, may
raise questions under ERISA’s section
404 general statutory duties of prudence
and loyalty. The Department issued this
cautionary statement based, in part, on
its observation that brokerage window
features were being marketed by some to
plan fiduciaries as a device to avoid
making participant investment
disclosures required under the
regulation.
The Department is aware that plan
fiduciaries and service providers
continue to have questions about their
duties under ERISA’s general fiduciary
standards apart from the specific
requirements of the participant-level
disclosure regulation. The Department
is committed to engage in discussions
with interested parties to help
determine how best to assure
compliance with these duties in a
practical and cost-effective manner.
This includes considering whether
amendment of relevant regulatory
provisions or interpretive guidance may
be appropriate and necessary to ensure
that participants and beneficiaries with
access to brokerage windows are
adequately protected.
Since issuance of the FAB, the
Department has reviewed literature,
articles and other commentary available
on the use of brokerage windows in
401(k) plans. The Request for
Information contained in this Notice
(the RFI) is the Department’s next step
in increasing its understanding of this
topic.
Some articles make the case that
brokerage windows can be highly
attractive and suitable plan features for
sophisticated investors. These
individuals assert that participants with
a more advanced understanding of the
investment marketplace, including the
various costs and risks associated with
investing in different types and classes
of securities, may benefit from brokerage
windows and the ability to create a
better customized, more diverse
portfolio. Brokerage windows may, for
example, provide access to a specialized
asset class or classes not available
through the plan’s core designated
investment alternatives. Sophisticated
investors may be less likely to be
the original FAB. The revised FAB replaced
Question 30 with Question 39, which is described
in this Notice.
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overwhelmed by a large number of
investment options and may benefit
from the flexibility that brokerage
windows offer.
Some articles make the case that
brokerage windows actually benefit
rank-and-file participants by indirectly
limiting the field. These individuals
assert that many plans over time have
increased the number of designated
investment alternatives they offer in
response to demands from company
owner-employees, senior executives,
and other potentially sophisticated
employee-investors for access to more
diverse investment opportunities. This
results in some plans having a very large
number of designated investment
alternatives, which may confuse less
knowledgeable participants. Making a
brokerage window available to the more
demanding employees enables plans to
offer a more manageable number of
designated investment alternatives to
rank and file employees who, according
to those proponents of brokerage
windows, have little or no interest in
investment opportunities beyond a basic
set of diversified options.
Other articles, however, counter that
brokerage windows may present undue
risks for many retirement plan
participants, because plan fiduciaries do
not engage in a deliberative process to
affirmatively review and select each of
the investment options available
through brokerage windows. Thus, they
say in the absence of a deliberative
review and selection process by an
ERISA fiduciary, participants may not
have adequate or any protections against
potentially costly or unsuitable
investments made through the brokerage
window. Opponents maintain, for
example, that the same or similar
investments often cost more when
selected through a brokerage window as
opposed to when they are designated by
the plan. Brokerage window opponents
maintain that plans have no bona fide
method to restrict brokerage window
access only to sophisticated
participants, and that the use of dollar
thresholds or gateways, for example,
may discriminate in favor of highly
compensated employees. Opponents
further maintain that although it is
permissible to do so, brokerage window
operators rarely limit the investments
they make available. Opponents also
allege that in-plan investments often
subsidize the administrative costs of
participants who opt to use the
brokerage window.
B. Request for Information
The purpose of this RFI generally is
to increase the Department’s
understanding of the prevalence and
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role of brokerage windows in
participant-directed individual account
plans covered by ERISA. In particular,
the RFI will focus on why, under what
circumstances, and how often these
brokerage windows are offered and used
in ERISA plans, and the legal and policy
issues that relate to such usage. 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
information received in response to this
RFI will assist the Department in
determining whether, and to what
extent, regulatory standards or
safeguards, or other guidance, are
necessary to protect participants’
retirement savings. The RFI contains a
number of questions. Respondents need
not answer every question, but should
identify, by its number, each question
addressed. Interested persons also are
encouraged to address any other matters
they believe to be germane to the
general topic of this RFI.
Defining ‘‘Brokerage Windows’’—
Scope. The Department understands
that a variety of different plan and
investment arrangements may be
encompassed by the terms ‘‘brokerage
window,’’ ‘‘self-directed brokerage
account,’’ and similar arrangements. For
example, open mutual fund windows
may permit participants to invest in
hundreds or thousands of mutual funds.
More limited mutual fund windows or
‘‘supermarkets’’ may permit participants
to invest in any mutual fund on one or
more of a particular vendor’s platforms,
but not necessarily every mutual fund
on the market. Other brokerage accounts
also offer participants access to a
virtually unlimited number of
individual stocks, exchange-traded
funds, and other securities.
1. What are the various brokerage
window, self-directed brokerage
account, and similar arrangements that
are made available in 401(k) plans, and
which one (or more) is the most
common? What are the benefits and
drawbacks of these various
arrangements?
2. If a more specific definition of a
‘‘brokerage window’’ is provided, as a
regulatory or interpretive matter, how
should it be defined?
3. Should the fiduciary, disclosure, or
other standards that apply to brokerage
windows (and which are raised in more
detail below) vary depending on the
type of arrangement, or perhaps the
ultimate number of investment options
available to participants (e.g., a mutual
fund window that offers access to fifty
mutual funds vs. an open brokerage
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49471
structure that offers access to many
thousands of stocks, mutual funds, and
other securities) and, if so, how?
Plan Investment Offerings—Brokerage
Windows and Designated Investment
Alternatives
4. What are the characteristics of
plans that offer brokerage windows?
5. Is the number of plans offering
brokerage windows increasing,
decreasing, or remaining relatively
constant? If the number is changing,
why?
6. What is a typical number of
‘‘designated investment alternatives’’
offered by a 401(k) plan? Are plans
increasing, decreasing, or holding
constant the number of designated
investment alternatives that they offer?
If the number is changing, why?
7. Is there any correlation between the
trends observed in the preceding two
questions, and if so, what is the
correlation?
8. At what point might the number of
investment options available to plan
participants warrant treating the options
as a ‘‘brokerage window’’ of some
variety, rather than as a menu of
‘‘designated investment alternatives?’’
Does the detailed investment-related
information required by the
Department’s participant-level
disclosure regulation for designated
investment alternatives (vs. brokerage
windows) affect the answer to this
question and, if so, how?
Participation in Brokerage Windows
9. How many participants, or what
proportion of participants, typically use
their plan’s brokerage window? What
proportion of a plan’s total assets
typically is invested through the
brokerage window?
10. Do respondents have demographic
data on these participants, either for a
particular plan or more broadly?
11. Of the participants that use their
plan’s brokerage window, do these
participants typically invest all of the
assets in their plan account through the
window, or some proportion of their
assets?
12. What types of restrictions, if any,
are typically made on brokerage
window participation (e.g., minimum
account balances, minimum dollar
amounts that may be transferred to a
brokerage window, maximum
percentage of account balance that may
be invested through a brokerage
window, etc.)?
13. Is there evidence of good or poor
decision-making and outcomes by those
participants using brokerage windows?
What types of evidence are available?
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14. What benefits accrue to
participants that invest through
brokerage windows? Do participants
who do not invest through the brokerage
window benefit from having a brokerage
window option in their plan, and if so,
how?
Selecting and Monitoring Brokerage
Windows and Service Providers
15. How many vendors does a plan
fiduciary research or contact, on
average, when deciding whether to
include a brokerage window feature?
How do vendors typically market
brokerage windows to their existing or
potential plan clients?
16. Do plan recordkeepers typically
require the use of their own or affiliated
brokerage services, or are plan
fiduciaries able to shop for brokerage
windows provided by multiple vendors?
Are there ways in which brokerage
window providers favor or encourage
investment in proprietary funds or
products through brokerage windows?
17. What factors do plan fiduciaries
consider and what challenges, if any, do
they face when deciding whether to
include a brokerage window and who
should provide the window?
18. What are the most common
reasons for adding a brokerage window
feature (e.g., flexibility and increased
investment options for participants, to
facilitate the ability of participants to
work with an adviser or a managed
account provider, etc.)? What role, if
any, do concerns about fiduciary
responsibility or disclosure obligations
play in deciding whether to add a
brokerage window?
19. When a plan fiduciary selects a
brokerage window feature for a plan,
does the plan fiduciary typically enter
into a contract for this service, on behalf
of the plan? If so, who are the parties to
the contract? If not, why not?
20. Do plan participants themselves
commonly contract with the vendor
when they choose to participate in the
brokerage window (either in lieu of, or
in addition to, a contract with a plan
official) and, if so, what role, if any,
does a plan fiduciary play in this
process?
21. What role, if any, do plan
fiduciaries play in the selection of
brokers, advisers, or other service
providers to a brokerage window? How
do plan fiduciaries monitor the
performance of these service providers
if at all?
Fiduciary Access to Information About
Brokerage Window Investments
22. How do plan fiduciaries monitor
investments made through their plan’s
brokerage window, if at all? For
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example, do plan fiduciaries have
access to information about specific
investments that are selected or asset
class or allocation information?
23. Do fiduciaries view this
information as important to effectively
monitoring the inclusion of a brokerage
window feature in their plan? If
applicable, how often do plan
fiduciaries request and review such
information?
24. What, if any, technological or
other challenges exist that may reduce
the feasibility, or increase the cost, of
compiling this type of information for
plan fiduciaries? Can respondents
quantify such costs?
Brokerage Window Costs
25. What are the most common costs
associated with participation in a
brokerage window (e.g., account fees,
brokerage commissions, etc.), and what
dollar amounts are typically charged?
Are there costs to including a brokerage
window that usually are borne by the
plan sponsor or by the plan, rather than
by individual participants who use the
brokerage window?
26. To what extent are brokerage
windows effectively subsidized by plan
participants other than those
participating in the brokerage window?
27. How do the costs of investing
through a brokerage window typically
compare to investing in a plan’s
designated investment alternatives?
How do the costs compare to investing
outside of the plan, e.g., in an IRA?
28. How significant of a factor to plan
fiduciaries are these costs when
deciding to add a brokerage window to
their plan? How do plan fiduciaries
monitor or oversee the fees and costs of
a brokerage window, available
investments, and related services? How
much discretion does a plan fiduciary
have in negotiating brokerage
commissions and other costs that
presumably cannot be controlled by
participants?
Disclosure Concerning Brokerage
Windows and Underlying Investments
29. Is the information required to be
disclosed about brokerage windows by
the Department’s participant-level
disclosure regulation sufficient to
protect plan participants? Is this
required information more or less than
plans disclosed prior to the effective
date of the regulation? Does this
information usually come from plan
administrators or from a third party,
such as plan service or investment
providers? What additional information,
if any, is or should be disclosed to
participants?
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30. Is different or additional
information disclosed to participants
after they elect to participate in a
brokerage window and, if so, what
information?
31. The Department has said that
disclosures regarding brokerage
windows or similar arrangements under
the participant-level fee disclosure
regulation must, at a minimum, provide
sufficient information to enable
participants and beneficiaries to
understand how the brokerage window
works (e.g., how and to whom to give
investment instructions; account
balance requirements, if any;
restrictions or limitations on trading, if
any; how the brokerage window differs
from the plan’s designated investment
alternatives) and who to contact with
questions. See FAB 2012–02R at Q&A
13. Do these disclosures regarding how
the brokerage window differs from the
plan’s designated investment
alternatives typically include a
description of the different risks and
costs of investing through a brokerage
window compared to investing in a
designated investment alternative? Also,
do the disclosures typically include a
description of differences in fiduciary
duties owed to participants investing
through a brokerage window compared
to investing in a designated investment
alternative?
32. In a recent report entitled, 401(k)
PLANS: Improvements Can Be Made to
Better Protect Participants in Managed
Accounts, GAO–14–310 (June 2014), the
United States Government
Accountability Office (GAO) recognized
that managed account or similar
services could be available to
participants through brokerage
windows. GAO recommended that the
Department, among other things, amend
regulations under title I of ERISA to
require plan sponsors who offer
managed account services to provide
participants with standardized
performance and benchmarking
information on managed accounts. For
example, one GAO suggestion is that
plan officials could be required to
periodically furnish each managed
account participant with the aggregate
performance of participants’ managed
account portfolios and returns for broadbased securities market indices and
applicable customized benchmarks. To
what extent is the GAO
recommendation feasible and advisable
for participants who access managed
account services with or without a
brokerage window?
The Role of Advisers
33. How often do plan fiduciaries
engage advisers to assist with decisions
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about whether, and what type of
brokerage window to include in their
plan?
34. How often do plan participants
use an adviser or a provider of managed
account services to help them make
investments through a plan brokerage
window?
35. Do plans generally make advisers
or managed account providers available
to participants for this purpose and, if
so, do the advisers or managed account
providers typically contract with the
plan or with the participant?
36. How often do plan participants
independently select advisers or other
providers to assist with their
investments through the brokerage
window? Are plan fiduciaries,
recordkeepers, or other service
providers generally aware of these
arrangements?
mstockstill on DSK4VPTVN1PROD with PROPOSALS
Fiduciary Duties
In connection with the issuance of
FAB 2012–02 and FAB 2012–02R, the
Department became aware of the
possibility that plan fiduciaries and
service providers have questions
regarding the nature and extent of
ERISA’s fiduciary of duties under
section 404(a) of ERISA in connection
with brokerage windows in plans
intended to be ‘‘ERISA 404(c) plans.’’
37. Do these questions indicate a need
for guidance, regulatory or otherwise, on
brokerage windows under ERISA’s
fiduciary provisions? For instance, is
there a need to clarify the extent of a
fiduciary’s duties of prudence, loyalty,
and diversification under section 404(a)
of ERISA, both with respect to brokerage
window itself, as a plan feature, and
with respect to the investments through
the window? If guidance is needed,
please try to identify the precise
circumstances in need of guidance. If no
guidance is needed, please explain why
not.
Annual Reporting and Periodic Pension
Benefit Statements
38. The annual reporting
requirements contain a special
provision for plans with brokerage
windows. Specifically, subject to certain
exceptions, the Schedule H allows plans
to report certain classes of investments
made through a brokerage window as an
aggregate amount under a catch-all
‘‘other’’ category rather than by type of
asset on the appropriate line item from
the asset category, e.g., common stocks,
mutual funds, employer securities, etc.
Should this special provision be
changed to require more detail and
transparency regarding these
investments? If so, what level of
transparency is appropriate, taking into
VerDate Mar<15>2010
16:23 Aug 20, 2014
Jkt 232001
account current technology and the
administrative burdens and costs of
increased transparency?
39. ERISA section 105 requires plans
to furnish benefit statements at least
quarterly in the case of participantdirected individual account plans. How
do these benefit statements typically
reflect investments made through
brokerage windows?
Signed at Washington, DC, this 7th day of
August 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
[FR Doc. 2014–19832 Filed 8–20–14; 8:45 am]
BILLING CODE 4510–29–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–RO1–OAR–2012–0848; A–1–FRL–
9912–99–Region 1]
Approval and Promulgation of Air
Quality Implementation Plans; New
Hampshire; Reasonably Available
Control Technology for Nitrogen
Oxides and Volatile Organic
Compounds
Environmental Protection
Agency.
ACTION: Proposed rule.
AGENCY:
The Environmental Protection
Agency (EPA) is proposing to approve
State Implementation Plan (SIP)
revisions submitted by the State of New
Hampshire. These revisions contain an
updated New Hampshire regulation
establishing reasonably available control
technology (RACT) for sources of
nitrogen oxides (NOX), RACT orders for
four facilities, and a request to withdraw
a previously approved NOX RACT order
from the SIP. The intended effect of this
action is to propose approval of this
updated regulation and four RACT
orders into the New Hampshire SIP, and
to propose to withdraw from the SIP a
previously approved NOX RACT order.
This action is being taken in accordance
with the Clean Air Act.
DATES: Written comments must be
received on or before September 22,
2014.
SUMMARY:
Submit your comments,
identified by Docket ID No. RO1–OAR–
2012–0848 by one of the following
methods:
1. www.regulations.gov: Follow the
on-line instructions for submitting
comments.
2. E-Mail: arnold.anne@epa.gov.
ADDRESSES:
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
49473
3. Fax: (617) 918–0047.
4. Mail: ‘‘EPA–RO1–OAR–2012–
0848,’’ Anne Arnold, U.S.
Environmental Protection Agency, EPA
New England Regional Office, 5 Post
Office Square—Suite 100, (Mail code
OEP05–2), Boston, MA 02109–3912.
5. Hand Delivery or Courier. Deliver
your comments to: Anne Arnold,
Manager, Air Quality Planning Unit,
Office of Ecosystem Protection, U.S.
Environmental Protection Agency, EPA
New England Regional Office, 5 Post
Office Square—Suite 100, (Mail code
OEP05–2), Boston, MA 02109–3912.
Such deliveries are only accepted
during the Regional Office’s normal
hours of operation. The Regional
Office’s official hours of business are
Monday through Friday, 8:30 a.m. to
4:30 p.m., excluding legal holidays.
Please see the direct final rule which
is located in the Rules Section of this
Federal Register for detailed
instructions on how to submit
comments.
Bob
McConnell, Air Quality Planning Unit,
U.S. Environmental Protection Agency,
EPA New England Regional Office, 5
Post Office Square, Suite 100 (mail
code: OEP05–2), Boston, MA 02109–
3912, telephone number (617) 918–
1046, fax number (617) 918–0046, email
mcconnell.robert@epa.gov.
FOR FURTHER INFORMATION CONTACT:
In the
Final Rules Section of this Federal
Register, EPA is approving the State’s
SIP submittal as a direct final rule
without prior proposal because the
Agency views this as a noncontroversial
submittal and anticipates no adverse
comments. A detailed rationale for the
approval is set forth in the direct final
rule. If no adverse comments are
received in response to this action rule,
no further activity is contemplated. If
EPA receives adverse comments, the
direct final rule will be withdrawn and
all public comments received will be
addressed in a subsequent final rule
based on this proposed rule. EPA will
not institute a second comment period.
Any parties interested in commenting
on this action should do so at this time.
Please note that if EPA receives adverse
comment on an amendment, paragraph,
or section of this rule and if that
provision may be severed from the
remainder of the rule, EPA may adopt
as final those provisions of the rule that
are not the subject of an adverse
comment.
For additional information, see the
direct final rule which is located in the
Rules Section of this Federal Register.
SUPPLEMENTARY INFORMATION:
E:\FR\FM\21AUP1.SGM
21AUP1
]]>Agencies
[Federal Register Volume 79, Number 162 (Thursday, August 21, 2014)]
[Proposed Rules]
[Pages 49469-49473]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19832]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Parts 2520 and 2550
RIN 1210-AB59
Request for Information Regarding Standards for Brokerage Windows
in Participant-Directed Individual Account Plans
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Request for information.
-----------------------------------------------------------------------
SUMMARY: The Employee Benefits Security Administration of the U.S.
Department of Labor (the Department) is publishing this Notice as part
of its review of the use of brokerage windows (including self-directed
brokerage accounts or similar arrangements) in participant-directed
individual account retirement plans covered by the Employee Retirement
Income Security Act of 1974 (ERISA). Some plans offer participants
access to brokerage windows in addition to, or in place of, specific
investment options selected by the plans' fiduciaries. Through these
arrangements, plan participants may be able to choose among the full
range of investment options available in the investment marketplace.
The Request for Information contained in this Notice will assist the
Department in determining whether, and to what extent, regulatory
standards or other guidance concerning the use of brokerage windows by
plans are necessary to protect participants' retirement savings. It
also will assist the Department in preparing any analyses that it may
need to perform pursuant to Executive Order 12866, the Paperwork
Reduction Act, and the Regulatory Flexibility Act.
DATES: Comments must be submitted on or before November 19, 2014.
ADDRESSES: You may submit written comments to any of the addresses
specified below.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: e-ORI@dol.gov. Include RIN 1210-AB59 (Brokerage
Windows RFI) in the subject line of the message.
Mail: Office of Regulations and Interpretations, Employee
Benefits Security Administration, Room N-5655, U.S. Department of
Labor, 200 Constitution Avenue NW., Washington, DC 20210, Attention:
``Brokerage Windows RFI.''
All submissions received must include the agency name and
Regulation Identifier Number (RIN) for this rulemaking. Comments
received will be posted without change to https://www.regulations.gov
and https://www.dol.gov/ebsa, and made available for public inspection
at the Public Disclosure Room, N-1513, Employee Benefits Security
Administration, 200 Constitution Avenue NW., Washington, DC 20210,
including any personal information provided. Do not include any
personally identifiable information (such as name, address, or other
contact information) or confidential business information that you do
not want publicly disclosed. Comments posted on the Internet can be
retrieved by most Internet search engines. Comments may be submitted
anonymously. Persons submitting comments electronically are encouraged
not to submit paper copies. All comments will be made available to the
public.
FOR FURTHER INFORMATION CONTACT: Kristen Zarenko, Office of Regulations
and Interpretations, Employee Benefits Security Administration, (202)
693-8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
[[Page 49470]]
A. Background
Retirement plans that allow participants to choose investments for
their individual accounts typically offer a limited set of specific
investment options, which are selected and monitored by a plan
fiduciary. Some plans also offer brokerage windows, which enable
participants to select investment options beyond those specifically
designated by the plan fiduciary. In some cases, the brokerage window
may be offered in place of any designated investment options. 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.
The Department addressed disclosure requirements for brokerage
windows in a regulation requiring plan administrators to disclose
certain plan and investment-related information to participants and
beneficiaries in participant-directed individual account plans (the
``participant-level disclosure regulation'').\1\ This regulation was
intended to ensure that all participants and beneficiaries in such
plans have the information they need to make informed decisions about
the management of their individual accounts and the investment of their
retirement savings. To that end, the regulation requires that, at least
annually, participants and beneficiaries are furnished a comparative
chart (or similar format) that contains information about the plan's
``designated investment alternatives.'' Plan administrators must, for
example, furnish fee, historical performance, and comparative benchmark
information for each designated investment alternative.
---------------------------------------------------------------------------
\1\ 75 FR 64910 (Oct. 20, 2010), codified at 29 CFR 2550.404a-5,
and including conforming changes to the Department's ``404(c)
regulation'' relating to plans that allow participants to direct the
investment of their individual accounts, at 29 CFR 2550.404c-1.
---------------------------------------------------------------------------
The regulation expressly provides that brokerage windows are not
``designated investment alternatives.'' \2\ As a result, plan
administrators are not required to disclose the detailed performance,
fee, and other investment-related information required with respect to
``designated investment alternatives.'' Instead, plan administrators
must provide ``a description of any `brokerage windows,' `self-directed
brokerage accounts,' or similar plan arrangements that enable
participants and beneficiaries to select investments beyond those
designated by the plan.'' \3\ In addition, the plan administrator must
provide an explanation of any fees and expenses that may be charged
against an individual account, on an individual, rather than on a plan-
wide, basis, in connection with the arrangement. Finally, participants
must be furnished a statement of the dollar amount of the fees and
expenses charged to their accounts in connection with the arrangement
during the previous quarter.\4\
---------------------------------------------------------------------------
\2\ The regulation defines a ``designated investment
alternative'' to mean: ``[A]ny investment alternative designated by
the plan into which participants and beneficiaries may direct the
investment of assets held in, or contributed to, their individual
accounts. The term ``designated investment alternative'' shall not
include `brokerage windows,' `self-directed brokerage accounts,' or
similar plan arrangements that enable participants and beneficiaries
to select investments beyond those designated by the plan.'' 29 CFR
2550.404a-5(h)(4) (emphasis added).
\3\ 29 CFR 2550.404a-5(c)(1)(i)(F).
\4\ 29 CFR 2550.404a-5(c)(3)(ii)(A).
---------------------------------------------------------------------------
Following publication of the participant-level disclosure
regulation, plan sponsors and administrators raised a number of
questions about the regulation, including how it applied to brokerage
windows. These questions concerned both the required disclosures for
brokerage windows as well as other fiduciary obligations that may arise
when a plan offers a brokerage window. In response, the Department
provided a series of ``frequently asked questions'' about the
participant-level disclosure regulation. These questions and answers
were published in Field Assistance Bulletin 2012-02R (FAB).\5\ FAB
Question 13 describes the information about brokerage windows that must
be furnished to participants and beneficiaries in order to satisfy
section (c)(1)(i)(F) of the regulation, which requires a
``description'' of the brokerage window. The FAB lists specific
information requirements, including instructions for participants on
how to use the plan's brokerage window, any restrictions on trading
within the brokerage window, and fees and expenses that may be charged
in connection with using the brokerage window (e.g., annual fees for
using the brokerage window feature, brokerage or other commissions for
trades within the brokerage window).
---------------------------------------------------------------------------
\5\ https://www.dol.gov/ebsa/regs/fab2012-2R.html.
---------------------------------------------------------------------------
FAB Question 39 \6\ clarifies that a brokerage window is not itself
a ``designated investment alternative'' under a plan. The Department
also explains in Question 39 that a plan fiduciary's failure to
designate investment alternatives, for example, by offering no menu of
core investment options other than a brokerage window to avoid the
regulation's investment-related disclosure requirements, may raise
questions under ERISA's section 404 general statutory duties of
prudence and loyalty. The Department issued this cautionary statement
based, in part, on its observation that brokerage window features were
being marketed by some to plan fiduciaries as a device to avoid making
participant investment disclosures required under the regulation.
---------------------------------------------------------------------------
\6\ The original version of the FAB, which was rescinded and
replaced by FAB 2012-02R, included Question 30, which some viewed as
raising the possibility that plan fiduciaries could be responsible
under ERISA for the underlying investments into which participants
invest through a brokerage window. Further, some plan sponsors and
service providers stated that the Department should not have issued
Question 30 without prior notice and opportunity for public comment.
Although the Department disagreed, it withdrew the original FAB. The
revised FAB replaced Question 30 with Question 39, which is
described in this Notice.
---------------------------------------------------------------------------
The Department is aware that plan fiduciaries and service providers
continue to have questions about their duties under ERISA's general
fiduciary standards apart from the specific requirements of the
participant-level disclosure regulation. The Department is committed to
engage in discussions with interested parties to help determine how
best to assure compliance with these duties in a practical and cost-
effective manner. This includes considering whether amendment of
relevant regulatory provisions or interpretive guidance may be
appropriate and necessary to ensure that participants and beneficiaries
with access to brokerage windows are adequately protected.
Since issuance of the FAB, the Department has reviewed literature,
articles and other commentary available on the use of brokerage windows
in 401(k) plans. The Request for Information contained in this Notice
(the RFI) is the Department's next step in increasing its understanding
of this topic.
Some articles make the case that brokerage windows can be highly
attractive and suitable plan features for sophisticated investors.
These individuals assert that participants with a more advanced
understanding of the investment marketplace, including the various
costs and risks associated with investing in different types and
classes of securities, may benefit from brokerage windows and the
ability to create a better customized, more diverse portfolio.
Brokerage windows may, for example, provide access to a specialized
asset class or classes not available through the plan's core designated
investment alternatives. Sophisticated investors may be less likely to
be
[[Page 49471]]
overwhelmed by a large number of investment options and may benefit
from the flexibility that brokerage windows offer.
Some articles make the case that brokerage windows actually benefit
rank-and-file participants by indirectly limiting the field. These
individuals assert that many plans over time have increased the number
of designated investment alternatives they offer in response to demands
from company owner-employees, senior executives, and other potentially
sophisticated employee-investors for access to more diverse investment
opportunities. This results in some plans having a very large number of
designated investment alternatives, which may confuse less
knowledgeable participants. Making a brokerage window available to the
more demanding employees enables plans to offer a more manageable
number of designated investment alternatives to rank and file employees
who, according to those proponents of brokerage windows, have little or
no interest in investment opportunities beyond a basic set of
diversified options.
Other articles, however, counter that brokerage windows may present
undue risks for many retirement plan participants, because plan
fiduciaries do not engage in a deliberative process to affirmatively
review and select each of the investment options available through
brokerage windows. Thus, they say in the absence of a deliberative
review and selection process by an ERISA fiduciary, participants may
not have adequate or any protections against potentially costly or
unsuitable investments made through the brokerage window. Opponents
maintain, for example, that the same or similar investments often cost
more when selected through a brokerage window as opposed to when they
are designated by the plan. Brokerage window opponents maintain that
plans have no bona fide method to restrict brokerage window access only
to sophisticated participants, and that the use of dollar thresholds or
gateways, for example, may discriminate in favor of highly compensated
employees. Opponents further maintain that although it is permissible
to do so, brokerage window operators rarely limit the investments they
make available. Opponents also allege that in-plan investments often
subsidize the administrative costs of participants who opt to use the
brokerage window.
B. Request for Information
The purpose of this RFI generally is to increase the Department's
understanding of the prevalence and role of brokerage windows in
participant-directed individual account plans covered by ERISA. In
particular, the RFI will focus on why, under what circumstances, and
how often these brokerage windows are offered and used in ERISA plans,
and the legal and policy issues that relate to such usage. 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 information received in response to this RFI
will assist the Department in determining whether, and to what extent,
regulatory standards or safeguards, or other guidance, are necessary to
protect participants' retirement savings. The RFI contains a number of
questions. Respondents need not answer every question, but should
identify, by its number, each question addressed. Interested persons
also are encouraged to address any other matters they believe to be
germane to the general topic of this RFI.
Defining ``Brokerage Windows''--Scope. The Department understands
that a variety of different plan and investment arrangements may be
encompassed by the terms ``brokerage window,'' ``self-directed
brokerage account,'' and similar arrangements. For example, open mutual
fund windows may permit participants to invest in hundreds or thousands
of mutual funds. More limited mutual fund windows or ``supermarkets''
may permit participants to invest in any mutual fund on one or more of
a particular vendor's platforms, but not necessarily every mutual fund
on the market. Other brokerage accounts also offer participants access
to a virtually unlimited number of individual stocks, exchange-traded
funds, and other securities.
1. What are the various brokerage window, self-directed brokerage
account, and similar arrangements that are made available in 401(k)
plans, and which one (or more) is the most common? What are the
benefits and drawbacks of these various arrangements?
2. If a more specific definition of a ``brokerage window'' is
provided, as a regulatory or interpretive matter, how should it be
defined?
3. Should the fiduciary, disclosure, or other standards that apply
to brokerage windows (and which are raised in more detail below) vary
depending on the type of arrangement, or perhaps the ultimate number of
investment options available to participants (e.g., a mutual fund
window that offers access to fifty mutual funds vs. an open brokerage
structure that offers access to many thousands of stocks, mutual funds,
and other securities) and, if so, how?
Plan Investment Offerings--Brokerage Windows and Designated Investment
Alternatives
4. What are the characteristics of plans that offer brokerage
windows?
5. Is the number of plans offering brokerage windows increasing,
decreasing, or remaining relatively constant? If the number is
changing, why?
6. What is a typical number of ``designated investment
alternatives'' offered by a 401(k) plan? Are plans increasing,
decreasing, or holding constant the number of designated investment
alternatives that they offer? If the number is changing, why?
7. Is there any correlation between the trends observed in the
preceding two questions, and if so, what is the correlation?
8. At what point might the number of investment options available
to plan participants warrant treating the options as a ``brokerage
window'' of some variety, rather than as a menu of ``designated
investment alternatives?'' Does the detailed investment-related
information required by the Department's participant-level disclosure
regulation for designated investment alternatives (vs. brokerage
windows) affect the answer to this question and, if so, how?
Participation in Brokerage Windows
9. How many participants, or what proportion of participants,
typically use their plan's brokerage window? What proportion of a
plan's total assets typically is invested through the brokerage window?
10. Do respondents have demographic data on these participants,
either for a particular plan or more broadly?
11. Of the participants that use their plan's brokerage window, do
these participants typically invest all of the assets in their plan
account through the window, or some proportion of their assets?
12. What types of restrictions, if any, are typically made on
brokerage window participation (e.g., minimum account balances, minimum
dollar amounts that may be transferred to a brokerage window, maximum
percentage of account balance that may be invested through a brokerage
window, etc.)?
13. Is there evidence of good or poor decision-making and outcomes
by those participants using brokerage windows? What types of evidence
are available?
[[Page 49472]]
14. What benefits accrue to participants that invest through
brokerage windows? Do participants who do not invest through the
brokerage window benefit from having a brokerage window option in their
plan, and if so, how?
Selecting and Monitoring Brokerage Windows and Service Providers
15. How many vendors does a plan fiduciary research or contact, on
average, when deciding whether to include a brokerage window feature?
How do vendors typically market brokerage windows to their existing or
potential plan clients?
16. Do plan recordkeepers typically require the use of their own or
affiliated brokerage services, or are plan fiduciaries able to shop for
brokerage windows provided by multiple vendors? Are there ways in which
brokerage window providers favor or encourage investment in proprietary
funds or products through brokerage windows?
17. What factors do plan fiduciaries consider and what challenges,
if any, do they face when deciding whether to include a brokerage
window and who should provide the window?
18. What are the most common reasons for adding a brokerage window
feature (e.g., flexibility and increased investment options for
participants, to facilitate the ability of participants to work with an
adviser or a managed account provider, etc.)? What role, if any, do
concerns about fiduciary responsibility or disclosure obligations play
in deciding whether to add a brokerage window?
19. When a plan fiduciary selects a brokerage window feature for a
plan, does the plan fiduciary typically enter into a contract for this
service, on behalf of the plan? If so, who are the parties to the
contract? If not, why not?
20. Do plan participants themselves commonly contract with the
vendor when they choose to participate in the brokerage window (either
in lieu of, or in addition to, a contract with a plan official) and, if
so, what role, if any, does a plan fiduciary play in this process?
21. What role, if any, do plan fiduciaries play in the selection of
brokers, advisers, or other service providers to a brokerage window?
How do plan fiduciaries monitor the performance of these service
providers if at all?
Fiduciary Access to Information About Brokerage Window Investments
22. How do plan fiduciaries monitor investments made through their
plan's brokerage window, if at all? For example, do plan fiduciaries
have access to information about specific investments that are selected
or asset class or allocation information?
23. Do fiduciaries view this information as important to
effectively monitoring the inclusion of a brokerage window feature in
their plan? If applicable, how often do plan fiduciaries request and
review such information?
24. What, if any, technological or other challenges exist that may
reduce the feasibility, or increase the cost, of compiling this type of
information for plan fiduciaries? Can respondents quantify such costs?
Brokerage Window Costs
25. What are the most common costs associated with participation in
a brokerage window (e.g., account fees, brokerage commissions, etc.),
and what dollar amounts are typically charged? Are there costs to
including a brokerage window that usually are borne by the plan sponsor
or by the plan, rather than by individual participants who use the
brokerage window?
26. To what extent are brokerage windows effectively subsidized by
plan participants other than those participating in the brokerage
window?
27. How do the costs of investing through a brokerage window
typically compare to investing in a plan's designated investment
alternatives? How do the costs compare to investing outside of the
plan, e.g., in an IRA?
28. How significant of a factor to plan fiduciaries are these costs
when deciding to add a brokerage window to their plan? How do plan
fiduciaries monitor or oversee the fees and costs of a brokerage
window, available investments, and related services? How much
discretion does a plan fiduciary have in negotiating brokerage
commissions and other costs that presumably cannot be controlled by
participants?
Disclosure Concerning Brokerage Windows and Underlying Investments
29. Is the information required to be disclosed about brokerage
windows by the Department's participant-level disclosure regulation
sufficient to protect plan participants? Is this required information
more or less than plans disclosed prior to the effective date of the
regulation? Does this information usually come from plan administrators
or from a third party, such as plan service or investment providers?
What additional information, if any, is or should be disclosed to
participants?
30. Is different or additional information disclosed to
participants after they elect to participate in a brokerage window and,
if so, what information?
31. The Department has said that disclosures regarding brokerage
windows or similar arrangements under the participant-level fee
disclosure regulation must, at a minimum, provide sufficient
information to enable participants and beneficiaries to understand how
the brokerage window works (e.g., how and to whom to give investment
instructions; account balance requirements, if any; restrictions or
limitations on trading, if any; how the brokerage window differs from
the plan's designated investment alternatives) and who to contact with
questions. See FAB 2012-02R at Q&A 13. Do these disclosures regarding
how the brokerage window differs from the plan's designated investment
alternatives typically include a description of the different risks and
costs of investing through a brokerage window compared to investing in
a designated investment alternative? Also, do the disclosures typically
include a description of differences in fiduciary duties owed to
participants investing through a brokerage window compared to investing
in a designated investment alternative?
32. In a recent report entitled, 401(k) PLANS: Improvements Can Be
Made to Better Protect Participants in Managed Accounts, GAO-14-310
(June 2014), the United States Government Accountability Office (GAO)
recognized that managed account or similar services could be available
to participants through brokerage windows. GAO recommended that the
Department, among other things, amend regulations under title I of
ERISA to require plan sponsors who offer managed account services to
provide participants with standardized performance and benchmarking
information on managed accounts. For example, one GAO suggestion is
that plan officials could be required to periodically furnish each
managed account participant with the aggregate performance of
participants' managed account portfolios and returns for broad-based
securities market indices and applicable customized benchmarks. To what
extent is the GAO recommendation feasible and advisable for
participants who access managed account services with or without a
brokerage window?
The Role of Advisers
33. How often do plan fiduciaries engage advisers to assist with
decisions
[[Page 49473]]
about whether, and what type of brokerage window to include in their
plan?
34. How often do plan participants use an adviser or a provider of
managed account services to help them make investments through a plan
brokerage window?
35. Do plans generally make advisers or managed account providers
available to participants for this purpose and, if so, do the advisers
or managed account providers typically contract with the plan or with
the participant?
36. How often do plan participants independently select advisers or
other providers to assist with their investments through the brokerage
window? Are plan fiduciaries, recordkeepers, or other service providers
generally aware of these arrangements?
Fiduciary Duties
In connection with the issuance of FAB 2012-02 and FAB 2012-02R,
the Department became aware of the possibility that plan fiduciaries
and service providers have questions regarding the nature and extent of
ERISA's fiduciary of duties under section 404(a) of ERISA in connection
with brokerage windows in plans intended to be ``ERISA 404(c) plans.''
37. Do these questions indicate a need for guidance, regulatory or
otherwise, on brokerage windows under ERISA's fiduciary provisions? For
instance, is there a need to clarify the extent of a fiduciary's duties
of prudence, loyalty, and diversification under section 404(a) of
ERISA, both with respect to brokerage window itself, as a plan feature,
and with respect to the investments through the window? If guidance is
needed, please try to identify the precise circumstances in need of
guidance. If no guidance is needed, please explain why not.
Annual Reporting and Periodic Pension Benefit Statements
38. The annual reporting requirements contain a special provision
for plans with brokerage windows. Specifically, subject to certain
exceptions, the Schedule H allows plans to report certain classes of
investments made through a brokerage window as an aggregate amount
under a catch-all ``other'' category rather than by type of asset on
the appropriate line item from the asset category, e.g., common stocks,
mutual funds, employer securities, etc. Should this special provision
be changed to require more detail and transparency regarding these
investments? If so, what level of transparency is appropriate, taking
into account current technology and the administrative burdens and
costs of increased transparency?
39. ERISA section 105 requires plans to furnish benefit statements
at least quarterly in the case of participant-directed individual
account plans. How do these benefit statements typically reflect
investments made through brokerage windows?
Signed at Washington, DC, this 7th day of August 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 2014-19832 Filed 8-20-14; 8:45 am]
BILLING CODE 4510-29-P
