Education/Advice

When it comes to retirement plans, the most common question about education and advice is, how much education can you offer before it becomes advice (it is worth noting that there is no obligation under ERISA to provide participants with investment education or advice).  Knowing where that line is matters because there is a fiduciary obligation that comes with providing the latter that is not associated with the former. 

Since the passage of the Pension Protection Act of 2006, plan sponsors have received some additional clarity about their obligations regarding offering participant advice.  Essentially, the Department of Labor has said (as recently as Field Assistance Bulleting 2007-01) that the plan fiduciary has no obligation to monitor specific advice given, but remains responsible “for the prudent selection and periodic review of a fiduciary adviser.”  

How Far CAN Education Go Without Crossing the Line?  

To provide clarification, the Department of Labor has highlighted the kinds of information that it does not consider investment advice.  The following information does not constitute investment advice, regardless of who provides it, how often they do so, or how they deliver the information: 

 Information about the plan, such as: 

• plan investment alternatives
• fund descriptions
• risk/return characteristics
• historical returns
• prospectuses   

General financial/investment information, such as: 

• diversification
• dollar cost averaging
• compounding
• advantages of tax deferral
• risk/return
• how to estimate future retirement needs
• historical differences in rates of return between different asset classes
• impact of inflation 

Asset allocation   

Interactive investment materials—on the theory that they allow the participant to independently create their own models and draw their own conclusions, and thus no "advice" per se is rendered.  In fact, these can even be used in individual sessions without crossing the line.