ASPPA Requests Clarity on Definition of Fiduciary
Enhanced Disclosure & Guidance Needed to Protect Plan Sponsors & Participants
ARLINGTON, VA, (January 27, 2010) – The following is a statement from Brian Graff, Executive Director/CEO of The American Society of Pension Professionals & Actuaries (ASPPA) in response to the U.S. Department of Labor’s (DOL) proposed modifications to the regulation (29 CFR Part 2510) defining the term “fiduciary” under section 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA). Read the full comment letter filed today with the agency’s Employee Benefits Security Administration (EBSA) here.
“ASPPA and its affiliated organizations, the Council of Independent 401(k) Recordkeepers (CIkR), and the National Association of Independent Retirement Plan Advisors (NAIRPA) applaud the DOL’s decision to update its guidance on the definition of fiduciary under ERISA.
In the 35 years since ERISA was enacted there have been major changes in the retirement services arena—in fact, 401(k) plans did not exist when the regulation was written. Adjustments are now needed to ensure the definition of investment advice is consistent with current industry practices. Plan fiduciaries are responsible for ensuring these plans are run properly, serving a vital role in the employee sponsored retirement system. We believe focused guidance will provide enhanced protections for plan fiduciaries, participants and beneficiaries.
Clarity is needed in this area, particularly when determining whether an individual is a fiduciary based on the DOL’s current five-part test. We support the DOL’s approach in the proposed regulation that any provision of advice would result in fiduciary status if the other criteria set forth were satisfied. We agree that requiring advice to be provided more than once in order to result in fiduciary status would be inconsistent with the reasonable expectations of plan fiduciaries and simply makes no sense.
Disclosure is key for retirement plan fiduciaries— they need to know whether the guidance they receive is investment advice or be informed that they are not receiving investment advice. We recommend that the DOL clarify that the disclosure of the seller/purchaser’s conflict of interest be made in writing or electronically, in clear language, and acknowledged in writing or electronically by a plan fiduciary.
ASPPA, NAIRPA, and CIkR have concerns about the application of the proposed regulation to Individual Retirement Accounts (IRAs) which we believe require increasing guidance and enforcement. We recommend guidance for retail IRAs be considered in a comprehensive manner given the fundamental differences between IRAs and qualified retirement plans. Unlike retirement plans such as 401(k)s, retail IRAs are not maintained by employers or employee organizations which may provide greater flexibility but leaves participants without the protections available to qualified retirement plans under ERISA and the Internal Revenue Code.
It is our experience that no agency within the federal government has current significant enforcement oversight with respect to IRAs. Therefore, any regulatory initiative in the IRA arena must be supported by an active enforcement regime to ensure consistent application. As a result, we believe that a comprehensive approach to IRAs should be taken at some future date and perhaps in conjunction with the newly formed Consumer Protection Financial Bureau.
We look forward to the opportunity to testify on this topic before the agency at the “Definition of Fiduciary” hearing on March 1, 2011. ”
Read the full comment letter here.
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About ASPPA: The American Society of Pension Professionals & Actuaries (ASPPA) is a national organization of more than 7,500 retirement plan and benefits professionals that serves as the educator, voice, and advocate for the employer-based retirement system. ASPPA members are administrators, actuaries, advisors, attorneys, accountants, and other financial services professionals who provide consulting and administrative services for qualified retirement plans.
About CIkR: The Council of Independent 401(k) Recordkeepers (CIkR) is a national organization of 401(k) plan service providers. CIkR members are unique in that they are primarily in the business of providing retirement plan services as compared to financial services companies who primarily are in the business of selling investments. Collectively the members of CIkR provide services for over 68,000 retirement plans covering 2.8 million participants and holding in excess of $120 billion in assets.
About NAIRPA: The National Association of Independent Retirement Plan Advisors (NAIRPA) is a national organization of firms which provide independent investment advice to retirement plans and participants. NAIRPA’s members are registered investment advisors whose fees for investment advisory services do not vary with the investment options selected by the plan or participants. In addition, NAIRPA members commit to disclosing expected fees in advance of an engagement, reporting fees annually thereafter and agreeing to serve as a plan fiduciary with respect to all plans for which it serves as a retirement plan advisor.
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