DOL Issues FAQs for 401(k) Plan Advisors

August 10, 2017

Client Alert
The Department of Labor (the “DOL”) recently issued another set of FAQs, focusing on advisors to 401(k) plans. The FAQs generally address two issues. The first issue deals with the interaction of the fiduciary rule with the already existing service provider disclosure rules under the DOL’s 2012 Section 408(b)(2) regulations. The second issue deals with whether recommendations to increase participant contributions and participation in retirement plans constitutes fiduciary investment advice.

Section 408(b)(2) Disclosure Update

The Section 408(b)(2) regulations require covered service providers to provide plan fiduciaries with certain information about the services they provide to the plans and the compensation they receive for such services. Among the information such service providers must disclose is whether they intend to provide fiduciary services to a plan. The DOL indicated that questions have been raised regarding the interplay between the new fiduciary rule and the required fiduciary disclosures under the Section 408(b)(2) regulations. In response, the DOL provided in the FAQs the following:

Recommendations to Increase Contributions to 401(k) Plans or IRAs or Participation in 401(k) Plans

Provided that plans and their service providers do not recommend a particular investment or investment strategy, communications “about the benefits of plan or IRA participation, [and] the benefits of increasing plan or IRA contributions” will not be treated as fiduciary investment advice. Similarly, provided that information and materials do not include recommendations with respect to specific investment products or investment strategy, recommendations or suggestions to plan administrators or other plan fiduciaries related to methods to increase plan participation or the level of plan contributions will not be treated as fiduciary investment advice.

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