ERIC: Fiduciary Redefinition Could Discourage Assistance to Participants

February 3, 2011 ( – In its comments to the Department of Labor on proposed regulations to change the definition of “fiduciary,” the ERISA Industry Committee (ERIC) warned about the unintended consequences that can result from broadening the scope of the definition.

ERIC said the risk of liability might cause well-intentioned stakeholders to refrain from providing informal assistance to plan participants, beneficiaries, and others who are in need.  “ERIC is concerned that if the definition is broadened too much, the fear of fiduciary liability will chill well-intentioned stakeholders’ willingness to help others,” said ERIC President Mark Ugoretz, in the letter.  

ERIC recommended the following changes to ensure that well-intentioned stakeholders can offer informal assistance without the risk of fiduciary liability: 

  • The final regulation should include a safe harbor for advisers whose principal responsibilities do not include providing investment advice. These advisers should not be treated as fiduciaries if they indicate orally or in writing the scope of their role and that they are not investment advisers and are not undertaking to provide investment advice.  
  • The proposal to apply fiduciary standards to advice provided “pursuant to an agreement, arrangement or understanding . . . that such advice may be considered in connection with making investment or management decisions” should be changed to apply only if there is a “mutual agreement, arrangement or understanding . . . that such advice will be a material consideration in a pending investment or management decision.”  
  • The final regulation should clarify that the “for a fee” condition is not satisfied unless (i) the adviser is engaged and paid to provide investment advice, or (ii) the adviser’s compensation will be affected if the investment advice is followed.  
  • A fiduciary who is not responsible for providing investment advice should not be treated differently than anyone else who is not responsible for investment advice.  


ERIC said it is important to take into account the costs that service providers who are treated as fiduciaries are likely to pass through to plans, which might include, for example, new insurance costs and a fee premium for being exposed to new legal risks.  

The association also contended that a routine recommendation to take a distribution or roll over an account balance to an IRA or another employer’s plan should not be treated as investment advice. However, if the advice is provided by an adviser who is engaged before the distribution occurs for his or her investment or financial planning expertise, or who stands to gain from an investment decision related to the distribution, the adviser should be treated as a fiduciary.  

The comment letter is here.