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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The Department of Labor's Employee Benefits Security Administration (EBSA) has issued guidance on a statutory exemption from the prohibited transaction rules for certain providers of investment advice ("fiduciary advisers") to participants in participant-directed account plans. The exemption, which was added by the Pension Protection Act of 2006 (PPA; P.L. 109-280), applies to fiduciary advisers that receive fees in connection with their services to participants. EBSA's guidance, issued in the form of a Field Assistance Bulletin, makes it clear that the PPA statutory exemption does not invalidate or otherwise affect prior Labor Department guidance on investment advice.
Under the prohibited transaction rules of the Internal Revenue Code and ERISA, a fiduciary adviser is prohibited from giving participants investment advice that results in the payment of additional fees to the fiduciary adviser or its affiliates. Section 601 of the PPA added a statutory exemption under ERISA §408(b)(14) and Code Sec. 4975(d)(17), permitting a fiduciary adviser to receive compensation in connection with certain "eligible investment ad-vice arrangements" provided to participants. EBSA states that, for purposes of the exemption, the term "eligible investment advice arrangement" can include an arrangement which provides that any fees received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for investment of plan assets will not vary on the basis of any investment option the participant selects. This level fee requirement does not apply, says EBSA, to an affiliate of a fiduciary adviser, as long as the affiliate does not provide investment advice to the plan or its participants.
A "fiduciary adviser," for purposes of the exemption, is a plan fiduciary that both provides investment advice to the plan and is one of the following, or an affiliate, employee, agent, or registered representative of one of the following: a registered investment adviser, a bank or similar financial institution, an insurance company, or a registered broker dealer.
Enactment of the investment advice provisions of the PPA does not invalidate or otherwise affect prior Labor Department guidance concerning investment advice. Past guidance relating to investment advice, including Interpretive Bulletin 96-1 (CCH Pension Plan Guide ¶19,972D), Advisory Opinions 97-15A (CCH Pension Plan Guide ¶19,986N), 2001-09A (SunAmerica Advisory Opinion) (CCH Pension Plan Guide ¶19,988U ), and 2005-10A (CCH Pension Plan Guide ¶19,990V ), continue to represent the views of the Labor Department, and may continue to be relied upon by the employee benefits community, according to EBSA.
EBSA states that, generally, the fiduciary duties and responsibilities involved in the selection and monitoring of an investment adviser for participants and beneficiaries in a participant-directed individual account plan are the same, regardless of whether or not the program of investment advice services is one to which the statutory exemption applies. Fiduciaries selecting advisory programs are subject to the same fiduciary duty to prudently select and monitor investment advisers regardless of whether the advice arrangement was established under the ERISA §408(b)(14) exemption, EBSA explains.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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