Brokerage Window Guidance panned by those who offer it

Ary Rosenbaum
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Ary Rosenbaum - The Rosenbaum Law Firm P.C.

Witnesses testifying before the ERISA Advisory Council criticized the idea for additional fiduciary or disclosure obligations on 401(k) plans that contain brokerage windows. Of course, the witnesses had a bias since many of them offer it in their plan.

During the two-day hearing, witnesses representing private employers, law firms, and 401(k) industry groups claimed that participants who use self-directed brokerage windows are sophisticated investors familiar with the risks and that existing disclosures already inform participants. They also claim that any new fiduciary obligations might cause plans to cease offering brokerage windows.

I have never been a fan of self-directed brokerage windows, but I believe that there should be additional guidance to properly protect plan sponsors who offer these self-directed brokerage windows and I think we won’t get that guidance until a plan sponsor ends up getting sued.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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