The U.S. Department of Labor will soon publish a final rule that it says will make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs).
The final rule will be published in the January 21, 2009, edition of the Federal Register. The rule includes a regulation that implements the new statutory exemption for investment advice added to the Employee Retirement Income Security Act (ERISA) by the Pension Protection Act (PPA) and a related class exemption.
The final rule provides general guidance on the exemption's requirements, including computer model certification and disclosures by fiduciaries. The regulation also includes a model form to assist advisers in satisfying the exemption's fee disclosure requirement. In addition, the final rule includes a class exemption expanding the availability of investment advice.
The PPA amended ERISA by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice.
One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased. The other way is through an adviser compensated on a "level-fee" basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.
"Millions of American workers are responsible for managing their 401(k) and IRA accounts.” said Bradford P. Campbell, assistant secretary of the Labor Department's Employee Benefits Security Administration. "The final rule expands access to investment advice without compromising the critical protections for plan participants and beneficiaries. "
The department published a Request for Information in December 2006, published a proposed regulation in August 2008 and held a public hearing on the proposals on October 21, 2008.