Rep. Andrews Introduces Bill to Modify Investment Advice Rules

A bill that would change requirements for investment advice offered by retirement plan sponsors (ERISA plans only) has been introduced by Rep. Robert Andrews (D-NJ). The "Conflicted Investment Advice Prohibition Act of 2009" (H.R. 1988) would repeal the expanded advice provision contained in the Pension Protection Act (PPA) of 2006.

The PPA provided significant changes to the Employee Requirement Income Security Act of 1974 (ERISA) and allowed plan sponsors to provide investment advice they had developed themselves. The bill would cover ERISA plans such as 401(k)s. Similar 457 retirement plans are not bound by ERISA rules, but often track those rules in most circumstances as a matter of "best practices."

If enacted, the Andrews bill would roll back the advice provision. Andrews's bill would mean that a service provider and its affiliates that provide investment advice would not be allowed to manage any of the investment options in the plan.

The bill would also likely have an impact on provisions contained in the "SunAmerica Advisory Opinion" issued by the Department of Labor (DOL) in 2001. Many providers – even in the public sector – rely on the Sun America opinion and a related Frost Bank opinion for guidance on advice offered through various products including Managed Accounts.

Andrews' bill has been referred to the House Committee on Education and Labor. I could be included in the expanded fee disclosure legislation that is expected to be considered by the Education and Labor Committee shortly.