DOL headquarters in Washington.
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA)+ is continuing to clarify retirement investment options in defined-contribution plans.
On Tuesday, it issued an advisory opinion addressing when lifetime income investment options can be considered qualified default investment alternatives under federal law. The opinion concludes that the requestor’s lifetime income strategy program meets the department’s requirements to be a qualified default investment alternative under Employee Retirement Income Security Act section 404(c)(5) and the implementing regulation.
“The advisory opinion provides clarity and certainty to stakeholders,” Deputy Secretary Keith Sonderling said. “As the department works toward issuing proposed regulations, we remain committed to giving plan sponsors clear guidance and regulatory certainty.”
The opinion follows an executive order from President Donald Trump that directed the department to reexamine its guidance regarding fiduciary duties under ERISA in connection with making asset allocation funds that include alternative asset investments available to participants.
“A combination of regulatory overreach and encouragement of lawsuits filed by opportunistic trial lawyers has stifled investment innovation and largely relegated 401(k) and other defined-contribution retirement plan participants to asset classes whose returns lack the very same long-term net benefits allowed for and achieved by public pension plans and other institutional investors,” the executive order said. “My administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement.”
In addition to the advisory opinion, the Labor Department recently rescinded guidance from a Dec. 21, 2021, supplemental statement that discouraged fiduciaries from considering alternative assets in 401(k) retirement plan investment menus.
The department also intends to issue a notice of proposed rulemaking that clarifies the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, including potential safe harbors. EBSA’s Office of Regulations and Interpretations answers inquiries from individuals and organizations in the form of advisory opinions, which apply the law to a specific set of facts, or information letters, which merely call attention to well established principles or interpretations.
“The Department of Labor is continuing to take swift steps to implement President Trump’s executive order,” Labor Secretary Lori Chavez-DeRemer said. “Today’s advisory opinion is another step forward toward our goal of giving plan fiduciaries the flexibility to design retirement investment strategies that meet the needs of American workers.”
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