401k Brokerage Account Windows Targeted

Solo-k Plan

Self-directed 401k brokerage account windows have invariably been debatable. They might work perfectly for most physician or perhaps dental care 401k plans, but possibly are not appropriate in some other 401k plans.

Just recently the Department of Labor (DoL) indicated they plan to provide additional regulations on the use of brokerage account windows. Investment Professionals believe it is likely to be negative for brokerage window proponents since the DoL:

• Has typically been concerned with whether unsophisticated users get sufficient guidance to reach sound investing decisions. For instance, some participants might end up deciding to put money into much greater cost full price share class mutual funds simply because they had no clue there are many other share classes.

• Has previously shown worry regarding an employer’s fiduciary obligations when providing a brokerage account window. Moving forward with the previous point, could it be an employer’s fiduciary responsibility to assist participants choose the proper mutual fund share class?

• Thinks plan sponsors should limit investment options to a workable range, as opposed to the whole market which can be available with brokerage account windows. Once more, coming from a fiduciary point of view, just how are participants who can not manage to purchase investment recommendations directed towards suitable investment choices?

• Is particularly worried about whether or not it is reasonable for employers to provide brokerage account windows as the sole investment choice. There is lots of research data revealing that many investment options paralyze and perplex some participants.

What does the future of brokerage windows hold?

Most envision the DoL will:

1. Set up fiduciary recommendations and constraints for offering brokerage account windows;

2. Call for more notices for plan participants who may have access to brokerage account windows;

3. Control their use as the sole investment choice within a retirement plan; and

4. Offer clarification regarding the achievable range choices question brought up in the Hecker vs. Deere case where:

“Participants could choose to buy

twenty basic mutual funds and more

than 2500 others through BrokerageLink.

All these funds were also offered to

investors in the general public so expense

ratios were necessarily set to attract

investors in the marketplace. The expense

ratios among the twenty primary funds

ranges from just over 1% to as low as

.07%. Unquestionably, participants were

in a position to consider and adjust their

investment strategy based in part on the

relative cost of investing in these funds. It

is untenable to suggest that all of the more

than 2500 publicly available investment

options had excessive expense ratios. The

only possible conclusion is that to the

extent participants incurred excessive

expenses, those losses were the result of

participants exercising control over their

investments within the meaning of the safe

harbor provision.”

To put it briefly, the DoL will probably make promoting 401k brokerage account window choices more administratively troublesome as well as costly.

Solo 401k Plan: Your Opportunity for Checkbook Control of Your Future