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“DOL Re-Opens Brokerage Window Inquiry: Will It Clear the Air or Leave Participants in ‘Pane’?”

Sponsors of tax code Section 401(k) plans have long understood that plan fiduciaries bear a duty of prudence when it comes to the selection and monitoring of a plan's standard fare of investment options. However, in light of the increasingly varied demands of plan participants, some sponsors have opted to offer non-designated investment alternatives, including so called "brokerage windows,' in their plans as a way of increasing the control and choice of employees who wish to more actively participate in the management of their retirement savings.

Although for standard 401(k) offerings, prudent plan management dictates that plan fiduciaries closely monitor and, when appropriate, disclose plan investments, when choosing to offer brokerage windows, sponsors may have in part relied on past Department of Labor guidance that appeared to treat brokerage windows and 'similar plan arrangements' as outside the requirements that apply to standard 401(k) offerings. However, in a widely scrutinized 2012 field bulletin, and more recently in an August 2014 request for information, the DOL may have presaged what could amount to a foundational change in the treatment of these investment alternatives that could alter the 401(k) landscape. 

This article examines the DOL's 2012 field bulletin and August 2014 request for information, and the potential implications for plan sponsors, participants and other market participants. The information provided should also help readers assess the extent to which they may wish to provide information pursuant to the DOL's request (the deadline for which is November 19th.)

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