DOL to Propose New New-Rule on the Definition of Fiduciary
The Employee Benefits Security Administration (EBSA), the U.S. Labor Department agency charged with enforcing ERISA compliance, will attempt again to fashion a new definition of "fiduciary" under ERISA.
As Tony Maul wrote in these pages in October of last year, the current definition is over 35 years old. Investment choices for pension plans have changed drastically in the intervening years and the DOL has been trying to address the greater breadth of responsibility investment advisers have acquired as a result.
The definition proposed in 2010 generated significant commentary from the financial services industry, plan fiduciaries and beneficiaries. The DOL held two days of hearings in March where it received oral and written testimony from dozens of witnesses and reviewed hundreds of letters from the public. A House subcommittee held its own hearing in July.
Industry players argued the rule would have a chilling effect on the information advisers could give investors, would reduce their compensation by prohibiting more transactions, and would increase compliance costs. Unions and participants' representatives claimed the rule was not expansive enough. Legislators, such as Rep. Barney Frank, the ranking member of the House Financial Services Committee, urged a rethinking of the definition to address concerns the current proposal limited investment choices and didn't take into account potentially conflicting SEC rules.
Nearly all agreed that the proposed language needed clarification. That group included Phyllis Borzi, Assistant Secretary of Labor, who said: “We honestly weren’t as clear as we could have been and we’re trying to fix that." The DOL expects to publish the proposed new new-rule in January 2012.