The NAPA Government Affairs Committee submitted a comment letter Nov. 19 to the Department of Labor regarding the use of self-directed brokerage (SDB) windows and accounts in ERISA-covered participant-directed individual account retirement plans.
NAPA made three proposals to the DOL regarding the use of SDB windows and accounts in such plans:
- Establish a small-plan exception for SDB-only plans. In order to encourage small employers to sponsor participant-directed individual account plans, employers with 99 or fewer employees eligible to participate in the plan should be allowed to open SDB-only plans so long as each participant positively elects his or her investment choices on the SDB account application form. However, if a participant fails to make such an election, no contributions should be permitted to be made to the plan on the participant’s behalf until the election is made.
- Require large plans to designate core investments before offering SDB windows. In order to rely on the fiduciary protections provided by ERISA section 404(c), fiduciaries of retirement plans with 100 or more eligible employees should be required to designate a core menu of investment options if an SDB window is offered to participants and beneficiaries.
- Aggregate reporting of brokerage window assets on Schedule H should be permitted. The financial reporting rules for Form 5500 should continue to permit aggregate reporting of plan assets held in SDB accounts under the “other” category of Schedule H.
While the DOL’s process of reviewing SDB windows and accounts has really just begun, NAPA is hopeful the DOL will consider our proposals when (or if) they make any recommendations regarding their use in participant-directed individual account plans. We will continue to monitor the process and notify you of any developments.
Ronald J. Triche, Esq., APM, is NAPA's General Counsel and Director of Government Affairs. You may reach him at [email protected].
