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ASPPA Issues Clarification on Proposed Definition of Fiduciary Regulation

admin | July 28, 2011 | 0 Comments

Department of Labor’s Modifications Should Not
Include Individual Retirement Accounts (IRAs)

ARLINGTON, VA, (July 28, 2011) – The following is a statement from Brian Graff, Executive Director/CEO of The American Society of Pension Professionals & Actuaries (ASPPA) about 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).

“In light of recent statements regarding ASPPA’s position on the proposed definition of fiduciary regulation, ASPPA reiterates our support of the proposed regulation provided IRAs are removed from the pending rule.

We commend the DOL for attempting to address the issue—however we believe Individual Retirement Accounts (IRAs) should not be regulated by the Department without an effective means to enforce them.

If these rules continue to apply to IRAs, what will happen is that the heavily regulated firms like mutual fund and insurance companies will comply with the rules and less regulated companies won’t because they know there is no enforcement. As a consequence, applying these rules to IRAs could actually put investors at greater risk by giving unscrupulous providers a competitive advantage.

We reiterate our stance from our testimony/comment letter in March:

ASPPA, the Council of Independent Recordkeepers (CIkR), and the National Association of Independent Retirement Plan Advisors (NAIRPA) believe that these rules should not apply to Individual Retirement Accounts (IRAs). We recommend guidance for retail IRAs be considered in a comprehensive manner given the fundamental differences between IRAs and qualified retirement plans, and be supported by an active enforcement regime to ensure consistent application. Unlike retirement plans such as 401(k) plans, retail IRAs are not maintained by employers or employee organizations. Although this provides IRA owners with greater flexibility, it leaves them without many of the protections available to qualified retirement plans under ERISA and the Internal Revenue Code. (March 18, 2011 “ASPPA Clarifies Its Position on Proposed Definition of Fiduciary Regulation”)

Again, we strongly caution that the impact of the proposed regulation would create an unfair competitive advantage and leave unscrupulous providers to practice without an effective enforcement regime.”

Full text of ASPPA’s position:
• Read our testimony to DOL
• Read the comment letter
• Watch our video on the issue.

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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.