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Release Date: December 1, 2006
Release Number: 06-2018-NAT
Contact Name: Gloria Della/Peter Hong
Phone Number: 202.693.8664/202.693.4676

U.S. Labor Department Seeks Comments on Investment Advice Exemption for 401(k) Plans and IRAs

Washington - The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) today announced publication of two “requests for information” (RFI) to assist the department in implementing the investment advice statutory exemption under the Pension Protection Act (PPA) relating to 401(k)-type plans and individual retirement accounts (IRAs). The RFIs are to be published in the December 4, 2006 Federal Register.

The PPA amended the Employee Retirement Income Security Act (ERISA) by adding a new prohibited transaction exemption that allows greater flexibility for investment advisers to give advice to participants of 401(k) plans and IRAs.

One of the ways in which investment advice may be given under the exemption is through the use of an unbiased computer model. The computer model must be certified by an independent expert under rules to be prescribed by the department. The RFI on investment advice for 401(k)-type plans solicits information to assist the department in determining what expertise and procedures may be needed to qualify an expert to certify a computer model under the exemption. The PPA also requires the department to issue a model notice on fee disclosures related to the advice. To aid the department in issuing this notice, the RFI also solicits information on the types of fee disclosure materials currently used and their usefulness to plan participants.

The RFI on investment advice for IRAs will assist the department in fulfilling its obligation under the PPA to assess the feasibility of using computer models to provide advice to IRA participants. The PPA requires the department to solicit information from at least the top 50 IRA trustees and other entities offering computer model investment advice programs. A separate copy of the RFI, in addition to its publication in the Federal Register, will be provided to those entities so identified to ensure their receipt.

Written comments on the RFI for investment advice for 401(k) plans should be addressed to the Office of Regulations and Interpretation, Employee Benefits Security Administration, Room N-5669, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210, Attention: 401(k) Plan Investment Advice RFI. Written comments on the RFI for investment advice for IRAs should be submitted to the same address, Attention: IRA Investment Advice RFI. The public also may submit comments electronically by email to e-ori@dol.gov (for the 401(k) Plan Investment Advice RFI) or e-oed@dol.gov (for the IRA Investment Advice RFI), or through the federal e-rulemaking portal at www.regulations.gov.

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