Ex-EBSA chief says the law never barred 401(k) advice

Pontera and 401(k) Specialist put the question of who gets a say over a 401(k) balance to a panel convened around 401(k) Day, the awareness event championed by the Plan Sponsor Council of America, and the answers amount to a statement of where the held-away advice business believes it stands. The table was small and deliberate: Lisa M. Gomez, a former assistant secretary of labor for the Employee Benefits Security Administration; Dan Murphy, a former Consumer Financial Protection Bureau official whom the panel description credits with co-leading the bureau's personal financial data rights rulings; Penny Lee, president and CEO of the Financial Technology Association; Brian Vendig, president and CIO of MJP Wealth Advisors; and Pontera's Ben White, its director of retirement strategic partnerships. Brian Anderson, 401(k) Specialist's editor-in-chief, moderated the session, titled "Who gets a say in the 401(k)? Technology, trust and the future of advice."

Gomez supplied the sentence that will travel: the law, she said, "does not prohibit" participants from choosing an outside adviser, nor an outside adviser from providing that advice, and she extended the point to the employer's exposure — a worker's decision to bring an independent professional into the picture is the worker's own, not the employer's responsibility.

The authority she reached for was Interpretive Bulletin 96-1, which she described as drawing the line between financial professionals participants select and those a plan sponsor offers, and later statements from the department have repeated the point that sponsors and fiduciaries should not absorb liability for what an independent professional a participant chose goes on to do. The published account of the panel stops before the conditions attached to that protection, and the conditions are where this argument will live. A sponsor looking for cover will read the qualifier, not the headline.

Set against the industry's habits, that is a substantial public claim: advisers and financial institutions keep asking whether the distance between a siloed 401(k) account and an outside adviser is legal in nature, and a former head of the Labor Department's benefits arm has now said in public that it is not. The event was convened by a firm with a commercial interest in the answer and by a publication that covers the plan market; neither fact makes the legal reading wrong, nor is any of it attributable to the Department of Labor as it currently stands. These are former officials, a roundtable is not guidance, and the coverage attributes no position to the agency.

If the statute is not the wall, the panel's framing implies something else is, and the plausible candidates are operational: whether a recordkeeper will release account data to an adviser's platform, whether a sponsor will tolerate an outside professional touching participant holdings, and who holds execution. The coverage does not enumerate them. It is suggestive that Murphy, whose CFPB work was on personal financial data rights, sat alongside the head of a financial technology trade association; the industry's preferred frame, on that evidence, is portability — the participant owns the balance and directs where the data about it goes.

Pontera's own build-out shows what that infrastructure looks like. In August the firm added a second, non-discretionary route into held-away accounts, letting an adviser recommend changes inside an employer plan while the client does the executing, and the same month the wall around the 401(k) is coming down under pressure from technology, participant expectations, and adviser demand. This week's panel is further evidence the pressure is real; it is also evidence of how one-sided the movement has been, because the panel as the coverage describes it had no plan sponsor and no recordkeeper on it, which is either a gap in the guest list or an answer in itself.

The useful distinction is between what is settled and what is merely uncontested. That participants may hire advisers of their choosing has been the department's stated position, reiterated in subsequent statements, and nothing in the roundtable disturbed it. What changed is delivery: a recommendation that once required an adviser to sit in front of a plan participant can now reach every participant whose plan permits the connection, at a scale the older comfort statements were never written to contemplate. Scale is what will test a sponsor's tolerance — not whether one employee hires an adviser, but what happens when the whole plan does.

The department's enforcement attention is pointed elsewhere. In August the department issued an EBSA bulletin that reset priorities for ESOP fiduciaries and left an adequate-consideration rule still to come, which suggests the bandwidth for restating anything about participant-selected advisers is limited in the near term. That cuts both ways for the firms selling held-away access: no new constraint, and no new cover either.

The next real news will come from two places. One is the department itself, where an on-the-record statement from current EBSA leadership about participant-selected advisers would turn a former official's reading into something sponsors can price, and would move the economics for every firm selling a held-away workflow. The other is procurement: the first large sponsor to write an adviser-access clause into a recordkeeping contract will have declared the gate contractual, and therefore negotiable. Until one of those arrives, the roundtable's contribution is narrower than it looks — an on-the-record statement from a former assistant secretary of labor that the legal route is open, delivered at an event hosted by the company selling held-away access.