<nobr>May 5, 2010</nobr>

ERIC, Chamber and PSCA Advise DOL to Not Regulate "Generally Accepted Investment Theories"

ERIC News Release
For Immediate Release: May 5, 2010

Washington, D.C. -- The ERISA Industry Committee (ERIC), in coordination with the U.S. Chamber of Commerce (the Chamber) and the Profit Sharing/401k Council of America (PSCA) today submitted comments to the Department of Labor (DOL) warning the agency to not undercut "generally accepted investment theories."

The groups' comments, representing the employer point of view, are in response to DOL's proposed rule on investment advice. DOL in March 2010 re-proposed regulations on investment advice provided to participants and beneficiaries in individual account plans, including 401(k) plans, replacing a previously released final rule on investment advice that was withdrawn on November 20, 2009.

ERIC, the Chamber, and PSCA commend DOL for maintaining the Congressional intent of the Pension Protection Act in allowing employers to provide investment advice to workers, but warn that prescribing specific parameters on what constitutes a generally accepted investment theory is inconsistent with the statute and the Department's longstanding positions on the operation of a retirement plan in compliance with ERISA's fiduciary requirements.

DOL specifically requested comments on whether it should provide regulations on what constitutes generally accepted investment theories. The letter by ERIC, the Chamber, and PSCA specifically warns that such an action would have repercussions beyond the use of a computer model under the statutory exemption, and "emphatically urge[s] the DOL to reject this idea."

"We believe that Congress recognized that 'generally accepted investment theory' is a fluid concept with general principles and subject to change. The statute and the Department's own guidance recognize that an auditor will apply their expertise and training, not a strict methodology, in determining whether an investment theory is generally accepted," the letter states.

The letter also explains that the term "generally accepted investment theories" was first used in Interpretive Bulletin 96-1 as a way to reference industry standards while also retaining flexibility, so as not to impose any particular investment approach or philosophy that could become dated over time.

The letter also contends that retirement plan fiduciaries recognize the different philosophies between active management and passive management, and varying participant preferences as evidenced by the inclusion of both active and passive investment options in most individual account plans.

"If the DOL begins to prescribe investment theory then it will override the fiduciary obligations of the plan sponsor and professionals," the group argues. "Moreover, from a practical perspective, any regulation of investment theory will make that theory the de facto investment model for every plan. This result would be inappropriate, ineffective and potentially detrimental to many plan participants because it would result in a static proscription that would leave no room for new ideas even as they become generally accepted," the letter says.

Among the groups' other recommendations are that:

• The final rule clarify that historical performance is, among others, an appropriate and relevant consideration when distinguishing among investments in the same asset class; and


• DOL clarify language concerning the fee-leveling exemption to state that no fiduciary adviser may receive any fee or other compensation "that that varies based in whole or in part on a participant's or beneficiary's selection of an investment option."

A link to the letter appears below.

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For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Comment Letter on Investment Advice

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