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.
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.
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.