Trust Updates Archive
(May 18, 2009--Chicago, IL) -- The U.S. Department of Labor is again extending its "final rule" granting fiduciaries a safe harbor when providing investment advice to 401(k) participants and IRA beneficiaries. The new effective date is November 18, 2009. However, Washington sources say that the final rules is expected to be substantially revised and will most likely be effective 2010.
The Pension Protection Act amended ERISA, adding a prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased; the other is through an adviser compensated on a "level-fee" basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.
In the absence of rule granting a safe harbor, fiduciaries of ERISA-governed plans are prohibited from rendering investment advice to plan participants if they receive fees from any investment they recommend.
The DOL regulation was initially extended to May 22, under an Obama executive order that delayed the implementation of certain Bush Administration. In the initial extension, the DOL also re-opened the comment period.
Prior to the postponement, Congress George Miller (D-Calif.), chairman of the House Education and Labor Committee, had threatened to block the final rule.
House minority leader John Boehner (R-Ohio) called the DOL rule a “major step toward giving workers personally tailored advice.”
Miller sees it differently. “The rules proposed are nothing more than a boon for Wall Street and corporate executives."
To view the DOL rule published on January 21 Click Here.
No statement in this issue is offered as or should be
construed as legal opinion or advice.
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