New DOL ruling eases PFP worries.

The Department of Labor's Interpretive Bulletin 96-1, Participant Investment Education, released June 11, removes roadblocks for companies that provide financial guidance to their employees on 401(k) and other pension plans. For years, those providing such guidance, including CPAs, have had to worry about whether they were "fiduciaries," with potential liability for participant-directed investments, because they were providing investment advice under the Employee Retirement Income Security Act.

The bulletin creates safe harbors for those providing plan information, general financial and investment information, asset allocation models and interactive investment materials. Assistant Labor Secretary Olena Berg said the DOL's goal was to make it easier for plan participants to get the information they needed.

"I was surprised that the bulletin went beyond the scope of section 404(c)," said Bill Arnone, a partner of Ernst & Young. "The DOL is in effect saying: 'This is how far those of you serving these employees can go without becoming fiduciaries.'" The bulletin's effective date goes back over 20 years to January 1, 1975, so it includes many time-honored advisory practices. CPAs can thus be reassured that many services they've been providing for years are retroactively approved.

Increased role for CPAs

Arnone believes this ruling can only have a positive effect on CPAs providing investment advice. "Until now, everyone was very cautious. Basically, the DOL has said there's a lot you can do--in fact, doing nothing creates more of a risk than doing something," he said. "There's even more reason now for plan sponsors to engage CPAs to provide guidance to employees."

CPAs, who do not sell products, are especially well suited to the adviser role: Although the bulletin does not prohibit mutual fund companies, for example, from providing advice, the bulletin's language makes CPAs a safer choice. "CPAs would not present any possible problems," said Arnone. The DOL's ruling should make it more likely for employers to hire CPA firms to provide the investment education.

Phyllis Bernstein, American Institute of CPAs director of personal financial planning, advises CPAs qualified in this area to expand their practices in the wake of the bulletin. She says sponsors of plans with fewer than 1,000 participants are unlikely to have in-house expertise and thus may require CPAs' help in educating plan participants.

Interpretive Bulletin 96-1 is part of the Federal Register and can be downloaded from the DOL's Web site: http://wwwwdol.gov.