The Department of Labor
is planning to review the use of self-directed brokerage account windows in
retirement plans that allow a participant to go beyond the plan’s investment
menu options. The department is scheduled
to release a request for comment in April on brokerage windows in 401(k) plans.
Despite the attention
from the DOL, brokerage windows are not widespread. In 2012, they were offered
in 17.1% of 686 401(k) plans surveyed by the Plan Sponsor Council of America.
In 2012, the DOL
addressed concerns about brokerage windows in two Field Assistance Bulletins.
But the answers to the frequently-asked-questions posed in the documents
generated more questions in the financial industry.
The request for
comment process is the first step in the rule-making process and will focus on “fiduciary
obligations and regulatory safeguards” surrounding brokerage windows. Plan sponsors are looking for more guidance on
the use of brokerage windows and there are questions about disclosures as well
as whether a registered investment adviser has to be hired to help
The benefit of a
brokerage window is that it can provide a participant more choice and control
than the limited investment options in their 401(k) plans. But the focus on brokerage
windows also reflects the DOL's concern that plan participants are on their own
if they opt to use the mechanism.
“It allows the person
to go out, especially working with a good adviser, and build a portfolio that's
really adapted to their needs and risk tolerance,” said Harold Anderson,
president of Parkshore Wealth Management. “It's more custom to them.”
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