Commenters Express Concerns About Fiduciary Rule

With Tuesday’s deadline to submit comment letters about the fiduciary rule proposal, the Department of Labor received a flood of responses.

By Jill Cornfield | July 22, 2015
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Comments received by the Department of Labor about its fiduciary rule proposal expressed concern about increased regulatory burdens and costs for retirement plan sponsors and its potential to negatively affect plan participants’ access to plan advisers.

In its 19-page letter to the DOL, the ERISA Industry Committee (ERIC) expressed concern that the new rule will increase regulatory burdens and costs, and create uncertainty for plan sponsors and participants, as well as service providers. The organization suggested nine areas where the so-called fiduciary rule could be improved. Among them:

The DOL needs to clarify who qualifies as a fiduciary. “The regulation should be much more clear about which employees from a plan sponsor can offer authoritative investment advice,” ERIC says. The committee recommends narrowly defining a fiduciary as an employee whose “normal job duties include providing the investment information.”

The investment education carve-out. The section’s “investment education” provision should be modified to allow plan sponsors to identify certain investment options so that employees with varying levels of investment knowledge can participate.

A suggestion is not a recommendation. ERIC recommends narrowly defining a recommendation about investment advice to exclude activities that do not constitute an endorsement of, or encouragement to, invest in a particular way.

Call-center employees are not investment advisers. Employers should not incur liability for the investment advice provided by third party call center employees who provide investment advice. In a recent survey of ERIC members, 64% of respondents said they do use third parties to provide 401(k) advice. And 74% of them provide it as a bundled service contract with third party administrators.

ERIC’s letter is here

NEXT: The potential to change the participant/adviser relationship.