The Employee Benefits Security Administration says different compensation rules apply to retirement plan members’ investment advisors and the advisors’ financial services affiliates.

Robert Doyle, EBSA’s director of regulations and interpretations, comes to that conclusion in a batch of guidance on the new statutory exemption in the Pension Protection Act of 2006 for people and companies who provide investment advice for members of employer-sponsored retirement plans.

The PPA provision establishes rules that advisors can follow to get paid for giving plan members investment advice.

Advisors may be able to collect fees or commissions based on the investment options that plan members select if approved computer models generate the advice.

If human counselors supply the advice, then an advisory firm cannot tie its compensation to the investment options selected, Doyle writes in the guidance, EBSA Field Assistance Bulletin Number 2007-01.

Employers or other fiduciaries that prudently select and monitor an investment advice provider will not be liable for the provider’s advice, and they do not have to monitor the specific investment advice that the provider gives to specific advice recipients, Doyle writes.

But employers should use an objective process to assess an advice provider’s qualifications, fees and quality of services, and they should check to see whether the provider follows generally accepted investment theories, Doyle writes.

The PPA section restricting investment choice-linked compensation arrangements applies only to participants’ “fiduciary advisors,” not to affiliates of the advisors, Doyle writes.

“An affiliate of a registered investment adviser, a bank or similar financial institution, an insurance company, or a registered broker dealer will be subject to the varying fee limitation only if that affiliate is providing investment advice to plan participants and beneficiaries,” Doyle writes.

In addition, if the affiliate’s fees “do not vary or are offset against those received by the fiduciary for the provision of investment advice, no prohibited transaction would result solely by reason of providing investment advice and thus there would be no need for a prohibited transaction exemption,” Doyle writes.

Moreover, the varying limitations apply to individual professionals who work for or with fiduciary advisory firms only when they are providing investment advice, Doyle writes.

A copy of the EBSA PPA guidance is on the Web

In related news, EBSA will meet July 31 in Washington for a hearing on the feasibility of using computer models to provide advice to participants with individual retirement accounts and similar plans.