EBSA Press Release: Labor Department Permits Receipt of Brokerage Services on IRAs and Self-Employed Plans [07/29/1996]

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Millions of self-employed workers with individual retirement accounts (IRAs) or Keogh pension plans would get free or low cost brokerage services under a proposal by the U. S. Labor Department.

Under the department's proposed exemption, broker-dealers could provide services as incentives for maintaining IRAs and Keogh plans. The proposal would let IRA and Keogh customers receive services otherwise prohibited by Employee Retirement Income Security Act if certain conditions are met.

Services could include financial planning, direct deposit/debit and automatic fund transfer privileges, enhanced account statements, toll-free access to client service centers, check writing privileges, debit/credit cards, special newsletters, and reduced brokerage and asset management fees.

The proposed exemption would require the following conditions:

• the IRA or Keogh plan be established and maintained for the exclusive benefit of the participant, a spouse or beneficiary;
• services offered must be of the type the broker-dealer could offer consistent with federal and state laws;
• services be provided in the ordinary course of business by brokers to customers who qualify for such services but do not maintain IRA or Keogh plans with the broker- dealer;
• the account value or the fees incurred by the IRA or Keogh plan must be the same as that for any account eligible to receive reduced or no cost services;
• IRA and Keogh customers must be eligible for the same services offered to other customers with the same account values or who generate the same amount of fees; and
• investment performance on IRA and Keogh investments must be no less favorable than that of identical investments made by customers ineligible for the reduced or no cost investment services.

The proposed exemption is similar to the relief provided under Prohibited Transaction Exemption 93-2 which permits individuals who maintain IRAs and Keogh plans to receive reduced or no cost banking services.

The proposal is scheduled to be published in the July 31 Federal Register. Public comments or requests for a hearing should be submitted in writing to the Office of Exemption Determinations, Pension and Welfare Benefits Administration, U.S. Department of Labor, Room N-5649, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attn: D-09707.