In "Through the ‘Window,'" John Keefe writes that although many retirement plan advisers are not big fans of
brokerage windows, many lawyers, engineers, airline pilots and doctors are.
The report suggests that other flexibility-inducing options designed to prevent leakage, such as allowing
brokerage windows or "sidecar IRAs" inside a DC plan, could undermine adoption of qualified default investment alternatives.
Brokerage Windows. A
brokerage window allows employees to direct their investments beyond the portfolio selected by the plan sponsor.
The industry had complained that the department had ushered in a new requirement on
brokerage windows in its original Field Assistance Bulletin (FAB).
That's whether a broker-dealer would be able to properly identify the payer of indirect compensation in connection with
brokerage windows. While the provider of the
brokerage window is supposed to disclose indirect compensation through several types of investments that plan participants can make, the provider will not know up front which of those investments a participant will choose.
Members of the AICPA's DOL Liaison Task Force will continue to work with the DOL as it conducts a review of this alternative reporting method for plans with
brokerage windows in an effort to determine whether and under what circumstances such method of reporting may need to be modified to ensure adequate information is provided to plan sponsors, participants and beneficiaries, and the DOL, PBGC and IRS in the future.
How do you know if
brokerage windows are a good choice for you?
Notwithstanding the growth of TDFs,
brokerage windows have become more widely available: The 2019 Defined Contribution Trends Survey from consultant Callan found that 50% of DC plans offered a
brokerage window feature last year, up from 15% in 2009.
Summary paragraph:
Brokerage windows in 401(k) plans
The Department of Labor's Employee Benefits Security Administration (EBSA) backed off on its controversial fiduciary requirements involving
brokerage windows under its fee-disclosure rule 408(b)(2) that had the retirement planning community up in arms.
Summary paragraph: How to help limit the potential risks of
brokerage windowsAnother important matter under consideration by the DOL, Reish note, is the use of
brokerage windows in employer-sponsored retirement plans.
