DOL Finalizes Rule Authorizing the Provision of Personalized Investment Advice to Participants and Beneficiaries in Individual Account Plans
On October 24, 2011, the DOL issued a final rule permitting investment advisers to provide investment advice to participants and beneficiaries in self-directed individual account plans. The final rule implements an exemption to ERISA’s prohibited transactions rules added by the Pension Protection Act of 2006. Without this exemption, investment advisers could not provide investment advice to participants and beneficiaries in these types of plans without running afoul of ERISA’s prohibited transactions rules. The final rule, which is effective for transactions occurring on or after December 27, 2011, allows investment advisers to receive compensation from the investment products that they recommend, provided either: (1) the investment advice they provide is based on a computer model certified as unbiased and as applying generally accepted investment theories; or (2) the adviser is compensated on a “level-fee” basis (i.e., fees do not vary based on investments selected by the participant). According to the DOL, the final rule will make fiduciary investment advice more accessible for the millions of Americans that participate in self-directed individual account plans.