Business Group Proposes changes as public comment period ends
For Immediate Release
Washington, DC – While the new Labor Department rules further defining conflicts of interest in investment advice have evolved significantly, The ERISA Industry Committee (ERIC) today in a letter to the department, recommends changes to ensure that the new rule will not needlessly increase regulatory burdens and costs, and create uncertainty among plan sponsors, plan participants, and service providers.
In a 19-page filing as a Senate Subcommittee convenes a hearing today, and the Labor Department plans for August hearings on the rule, ERIC suggested nine areas where the so-called fiduciary rule could be improved. Among them:
- Who is a fiduciary- at the heart of the rule, the regulation should be much more clear about which employees from a plan sponsor can offer authoritative investment advice. ERIC recommends narrowly defining a fiduciary as an employee whose “normal job duties include providing the investment information.”
- The investment education carve out- the section’s “investment education” provision should be modified to allow plan sponsors to identify certain investment options so that employees with varying levels of investment knowledge can participate.
- A suggestion is not a recommendation- ERIC recommends narrowly defining a recommendation about investment advice to exclude activities that do not constitute an endorsement of, or encouragement to, invest in a particular way.
- Call center employees are not investment advisors- Employers should not incur liability for the investment advice provided by third party call center employees who provide investment advice. In a recent survey of ERIC members, 64% of respondents said they do use third parties to provide 401(k) advice. And 74% of them provide it as a bundled service contract with third party administrators.
ERIC also supports the carve-outs included in the proposed rule for large employers. These include the “seller’s exception, “employees of the plan sponsor” and the “swap transactions” carve-out. These exceptions appropriately address large plan sponsor activities that do not raise concerns at the core of the fiduciary rule.
Annette Guarisco Fildes, president and CEO of ERIC said that, “We urge the department to adopt a final regulation that separates legitimate fiduciary advice from extraneous activities that do not represent a conflict of interest. In doing so, we caution the department to ensure that increased regulatory burdens and costs created by the fiduciary rule are carefully tailored to provide corresponding benefits to plan participants.”
ERIC further states in the letter that employees, retirees and their families should have access to investment advice to achieve and sustain their retirement savings goals.