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DOL Concludes That Firm's Asset Allocation Advice Program Does Not Violate ERISA

Washington, DC, December 27, 2001 - The Department of Labor (DoL) has issued Advisory Opinion No. 2001-09A, which concludes that SunAmerica can offer a program that will provide independent asset allocation advice to plan participants without obtaining exemptive relief from the prohibited transaction provisions of ERISA. The DoL also has released a statement from Assistant Secretary Ann L. Combs concerning the advisory opinion, which the statement describes as “explain[ing] how financial service providers can provide independent investment advice without running afoul of the ERISA prohibited transaction rules.” The statement “remind[s] the regulated community” that the DoL will only provide exemptions for conduct that is clearly prohibited under ERISA. The statement also expresses the DoL’s continued support for the “Retirement Security Advice Act.”

The DoL states that its conclusion is based on certain facts. First, the plan fiduciaries responsible for selecting the program are fully informed about, and approve, the program and the nature of the services provided, including the role of the financial expert.

Second, the investment recommendations provided to, or implemented on behalf of, participants are the result of methodologies developed, maintained and overseen by a party that is independent of SunAmerica and its affiliates. The advisory opinion notes specifically that:

  • the financial expert retains sole control and discretion over the development and maintenance of the methodologies;
  • any programmers engaged to formulate the computer programs will have no affiliation with SunAmerica;
  • recommendations will be based solely on input of participant information into the computer programs; and
  • SunAmerica will not be able to change or affect the output of the computer programs or exercise discretion over the communication to, or implementation of, the recommendations.

Third, the arrangement between SunAmerica and the financial expert preserves the financial expert’s ability to develop model portfolios solely in the interests of plan participants and beneficiaries in that neither the financial expert’s compensation nor any other aspect of the arrangement is related to the fee income that SunAmerica or its affiliates will receive from investments made pursuant to the portfolios.