New Requirements for Plans???

[Below Ground]

I just read an email where the person was telling a client that fiduciary relief under 404© is fiction (no plans comply), and that benchmarking is required by law. To be clear, the email did not say 404© Protection is hard to get. It does not exist? Also, while benchmarking makes sense for reviewing your Plan, required by law? Where is that cite?

[BG5150]

For participant directed plans, certain disclosures are required to participants under 404(a)5. Certain disclosures are to to plan sponsors under 408(b)2.

The 404(a)5 notice includes comparing the plan's investment options to industry benchmarks.

here is your cite: https://www.law.cornell.edu/cfr/text/29/2550.404a-5

If a plan is conforming to 404©, the plan's fiduciaries are given some protection against participant claims of investment performance and choice.

Where 404(a)5 notice shows investment performance and fees, it does not provide the same protections as 404©, as 404© requires other actions to be taken or allowed by the plan sponsor (provide quarterly statements, allow inter-investment exchanges at least once per month...)

[John Feldt ERPA CPC QPA]

Also, how does a fiduciary satisfy the requirement that certain fees paid from plan assets must be reasonable if they don't have a sense of what folks are paying for such services? Does that imply some sort of benchmarking is needed perhaps?

[Below Ground]

Thanks. I forgot about the investment comparisons for the 404(a)(5) Notice. Do you know the cite for the 404(a)(5) Notice when using self directed brokerage accounts.

[BG5150]

I can't find it right now, but there Was a FAB a couple years ago that addressed it.

Basically, you don't need it for SDBs, however, it may not be considered prudent to have solely SDBs with no DIAs in the plan at all.

[Below Ground]

Thanks! I really appreciate that. My memory seems to be diminishing. And yes, Mr. Feldt. I really did not explain the email very well. It was directed at every aspect of the plan. Also, this email stated that no matter what action you took, there is no protection.

[RatherBeGolfing]

I believe the FAB you are referring to is 2012-02R. See Q39 below

Q39: A plan offers an investment platform that includes a brokerage window, self-directed brokerage account, or similar plan arrangement. The fiduciary did not designate any of the funds on the platform or available through the brokerage window, self-directed brokerage account, or similar plan arrangement as "designated investment alternatives" under the plan. Is the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement a designated investment alternative for purposes of the regulation?

A39. No. Whether an investment alternative is a "designated investment alternative" (DIA) for purposes of the regulation depends on whether it is specifically identified as available under the plan. The regulation does not require that a plan have a particular number of DIAs, and nothing in this Bulletin prohibits the use of a platform or a brokerage window, self-directed brokerage account, or similar plan arrangement in an individual account plan. The Bulletin also does not change the 404© regulation or the requirements for relief from fiduciary liability under section 404© of ERISA or address the application of ERISA's general fiduciary requirements to SEPs or SIMPLE IRA plans. Nonetheless, in the case of a 401(k) or other individual account plan covered under the regulation, a plan fiduciary's failure to designate investment alternatives, for example, to avoid investment disclosures under the regulation, raises questions under ERISA section 404(a)'s general statutory fiduciary duties of prudence and loyalty. Also, fiduciaries of such plans with platforms or brokerage windows, self-directed brokerage accounts, or similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan are still bound by ERISA section 404(a)'s statutory duties of prudence and loyalty to participants and beneficiaries who use the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement, including taking into account the nature and quality of services provided in connection with the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement.

The Department understands plan fiduciaries and service providers may have questions regarding the situations in which fiduciaries may have duties under ERISA's general fiduciary standards apart from those in the regulation. The Department intends to engage in discussions with interested parties to help determine how best to assure compliance with these duties in a practical and cost effective manner, including, if appropriate, through amendments of relevant regulatory provisions.