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August 21, 2008 at 11:57 AM
The U.S. Department of Labor has proposed regulations that would govern efforts to give individualized investment advice, in person or through computer programs, to individual retirement account holders and participants in employer-sponsored retirement plans.
The Labor Department will be publishing the proposed regulations, along with a deadline for public comments, Friday in the Federal Register.
Labor Department officials say they hope to complete the rules before the end of the year, when the current administration will leave office.
The proposed regulations implement a provision in the Pension Protection Act of 2006. The authors of the provision tried to encourage employers and other retirement plan program sponsors and providers to offer consumers investment advice by creating a safe harbor from the prohibited transaction provision of the Employee Retirement Income Security Act.
In addition to making the usual general request for public comments, the department has included many requests for comments about specific concepts and regulation provisions throughout the body of the draft.
A representative for the American Council of Life Insurers, Washington, has declined to comment on how the ACLI views specific provisions in the proposed regulations.
“We are pleased the [Labor] Department has moved forward with its proposals,” ACLI representative Steve Brostoff says. “We are now examining the specifics of the department’s proposals and intend to review them with our member companies.”
In the draft rule, the Labor Department says one way to provide investment advice would be through use of a computer model certified as unbiased.
The computer model must be designed and operated to apply generally accepted investment theories that “take into account the historic returns of different asset classes over defined periods of time,” the department says.
The computer program could apply generally accepted investment theories that take into account additional considerations, and it also could use information furnished by a participant or beneficiary relating to age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and investment preferences.
