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Employee Benefits Security Administration

Fact Sheet

Investment Advice Regulation

EBSA plans to improve access to investment advice for workers, while minimizing the potential for biased advice by advice providers with relationships to the investment products offered by their retirement plans, ultimately supporting the Secretary's good jobs for everyone policy.

Key Action: Proposed Regulation

The Department's EBSA plans to publish a proposed regulation in February 2010 to implement a statutory exemption for investment advice added to the Employee Retirement Income Security Act (ERISA) by the Pension Protection Act of 2006 (PPA). The statutory exemption and the Department's regulations are intended to improve access to investment advice for participants and beneficiaries, while minimizing the potential for biased investment advice by advice providers with relationships to the investment products offered by their plans.

Key Concern and Issues to be Addressed

Given the rise in participation in 401(k) type plans and individual retirement accounts (IRAs), the retirement security of millions of American workers increasingly depends on their investment decisions. Thus, there is increased recognition of the importance of investment advice in helping participants avoid costly investment errors.

The statutory exemption added to ERISA by the PPA and the Department's regulations are intended to improve access to investment advice for participants and beneficiaries, while minimizing the potential for biased investment advice by advice providers with relationships to the investment products offered by their plans.

Background

ERISA's prohibited transaction provisions generally prevent a person from providing investment advice to participants in 401(k) and similar plans if the person has relationships with the investments offered through the plan. The statutory exemption added by the PPA permits such advice, provided that the person furnishing the advice satisfies the conditions of the statute and the Department's regulations.

On January 21, 2009, the Department published final rules, implementing the PPA statutory exemption and adopting an administrative class exemption expanding the limited relief afforded by the statutory exemption. Following publication of the final rule, the Department determined it appropriate to review legal and policy issues raised by commenters with regard to the scope of the rule. The effective date of the final rule was delayed to provide time for this review. On the basis of the review, the Department determined that the regulation, as adopted in final form, may not assure all the protections Congress intended to be afforded to participants and beneficiaries receiving investment advice from persons with financial and other relationships with the investments included in their advice.

Given its findings, the Department has decided to withdraw the final regulation and issue a new proposed rule that is limited to implementing the statutory exemption. The withdrawal of the final rule was published in the Federal Register on November 20, 2009 (74 FR 60156) and will be effective on January 19, 2010.