Participant Advice Bill Passes Subcommittee

August 2, 2001 ( - Broader access to participant investment advice took another step forward Thursday, as the Employer-Employee Relations (EER) Subcommittee approved the Retirement Security Advice Act (HR 2269).

The bill, introduced by Subcommittee chair John Boehner (R-Ohio), passed by a voice vote. Boehner’s bill would take down barriers that currently prevent investment management firms from offering investment advice for a fee, subject to certain disclosures about potential conflicts of interest.  It would also provide explicit protections for employers that chose to offer participants access to investment advice.

Subcommittee passage comes on the heels of the recent endorsement of the bill by the Department of Labor (see DoL Embraces Advice Bill in Dramatic Turnaround ).

Breaking the Barrier

In its current form, the bill requires that investment advice may only be offered by “fiduciary advisers,” qualified entities that are already regulated under other federal and state laws (such as registered investment advisers, registered broker dealers, insurance companies, and banks).  Those advisors will be subject to fiduciary liability under the Employee Retirement Income Security Act (ERISA).  At the same time existing securities and state insurance law protections will also apply.

Critics have expressed concerns that the investment guidance provided would be inherently biased toward investments that are more lucrative from the perspective of the advice provider – a bias that could not be overcome by disclosures to participants.

Next Steps
The bill will likely be considered by the full Education and Workforce Committee, then possibly by the full House and Senate, after Congress returns from its August recess.

The bill currently has 41 cosponsors, including Democratic Caucus Chairman Martin Frost (D-TX), Majority Leader Dick Armey (R-TX), House Financial Services Committee Chairman Michael Oxley (R-OH); Democratic Reps. Brian Baird (WA), Ellen Tauscher (CA), Norm Dicks (WA); GOP reps. Ron Paul (TX), Tom Tancredo (CO), among others.

– Nevin Adams