While the Department of Labor (DOL) heard the loud complaints concerning their intention to imposing disclosure requirements for plan sponsors on self directed brokerage accounts within retirement plans, it doesn’t exempt plan sponsors from liability in having these brokerage accounts within these plans. In that same bulletin that relieves plan sponsors of these disclosure requirements, the DOL stated that ERISA’s general fiduciary duties of prudence and loyalty apply to the selection and monitoring and the quality of services provided in connection with the broker-dealers who provide such accounts by plan sponsors.
In addition, I am still convinced that plan sponsors as a fiduciary, have a requirement to monitor the investments made by participants within these accounts and may have liability issues if participants lose their shirts within these accounts. I am still convinced that a participant who loses all their retirement savings by investing in one stock within their brokerage account can sue a plan sponsor for those losses and may have a good shot at beating a motion for summary judgment if the plan sponsor provided no education to these plan participants.
I have never been a big fan of self directed brokerage accounts within retirement plans, so I just wanted to share with you that the liability concerns with these accounts are still there.