The Department of Labor’s released new proposed regs on providing advice to participants in individual retirement plans.

The proposed investment advice rules are intended to make sure that workers receive unbiased advice about how to invest in 401(k)-type plans.

The DOL will be accepting comments on the regs until May 5, and the regs are expected to be effective 60 days after publication of the final rule.

Here’s a quick look at some of the key provisions.

According to the proposed rules, investment advice can be given under the Pension Protection Act’s statutory exemption from liability (which allows employers to hire outsiders to provide investment advice to plan participants), but only if the advice is provided in two ways:

• through a financial advisor who is compensated on a “level-fee” basis, or
• through the use of a computer model that is certified as unbiased.

Level fees

The financial services company has to charge a flat fee schedule — in other words, fees don’t change depending on what investment options participants choose.

Computer models

If the rules are adopted, computer models used to offer advice would have to be certified in advance as objective and unbiased by an independent expert.

To comment on the proposed rules, click here.

But new research suggests two other factors that may be important in predicting enrollment rates: race and ethnicity.

According to a recent study, white and Asian employees are more likely to participate in their company 401(k) plans than African-American and Hispanic employees earning similar salaries.

The study benchmarked the average 401(k) participation rates of employees earning between $30,000 and $59,000 per year. It found:

• 75% of African-American and Hispanic employees participate in the 401(k) plan
•  80% of  Caucasian employees do, and
• 84% of Asian employees enroll.

The average employee salary contribution percentage at this salary range was 5.9% for African-Americans and 6.1% Hispanics; compared to 7.1% for whites and 8.4% for Asians.

However, the more 401(k) education employees of all ethnic groups receive, the lower the participation gap.

Click here for a complete study summary.

The expected participation rate may vary not only by your industry but also by your location. On a national level, 52% of employees participate.

 According to EBRI here are the five top and bottom states for retirement plan (defined benefit or defined contribution) participation.

Top 5:

1. Wisconsin (67.7% participation average)
2. Iowa (66.9%)
3. North Dakota (65.8%)
4. Connecticut (65.0%)
5. Minnesota (64.1%)

Bottom 5:

1. Florida (41.8% average participation)
2. Arizona (44.3%)
3. Louisiana (46.7%)
4. Texas (48.8%)
5. Nevada (50.3%)