The Investment Company Institute of Washington, D.C. last week announced its support of legislation that would revamp ERISA regulations to allow 401(k) plan providers to offer employees advice.
Rep. John Boehner, chairman of the U.S. House Subcommittee on Employer-Employee Relations, introduced the Retirement Security Advice Act on June 27. The legislation would answer a growing demand from plan participants for advice in their 401(k) programs, according to the ICI.
Under current law, 401(k) plan providers are prohibited from offering advice, said Ed Ferrigno, a vice president of the Profit Sharing/401(k) Council of America of Chicago. As a result, third-party advisory firms like Financial Engines of Palo Alto, Calif., mPower of San Francisco and Morningstar of Chicago have started offering participants advice on their 401(k) plans, he said.
Existing ERISA regulations allow plan providers to offer general information about 401(k) programs, but this does not satisfy participants' needs, said John Collins, a spokesperson for the ICI. The proposed legislation would allow plan providers to offer greater guidance, he said.
"I think it's been since the 80's that this has been a problem in the fund industry. [Plan providers] have no ability to provide advice," he said. "But things have gotten to the point where there are substantial assets in 401(k) programs. I think this is a natural consequence of the growth of assets."