Proposed federal rule would revise definition of ERISA fiduciary

By Kimberly Atkins The Daily Record Newswire The Department of Labor says it will re-propose a rule to revise the definition of fiduciary in regulations under the Employee Retirement Income Security Act. The rule would amend a 1975 regulation defining when a person providing investment advice becomes a fiduciary under ERISA. The goal, according to the Labor Department, is to adapt the rule to the current retirement marketplace and protect against conflicts of interest among advisers. Among other things, the proposed rule would clarify that fiduciary advice is limited to individualized advice directed to specific parties. That provision is in response to comments received by the agency after a previous proposed revision expressing concerns about the application of the regulation to routine appraisals and arm's-length commercial transactions. The proposal will also address concerns about the impact of the new regulation on the current fee practices of brokers and advisers, according to the Labor Department. It reaffirms exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. The agency will continue to craft new or amended exemptions to preserve beneficial fee practices, while at the same time protecting plan participants and individual retirement account owners from abusive practices and conflicted advice, Labor officials said. "We have said all along that we will take the time to get this right to ensure that we provide the strongest possible protections to business owners and retirement savers in plans and IRAs," said EBSA Assistant Secretary Phyllis C. Borzi in a statement announcing the proposed rule. "Investment advisers shouldn't be able to steer retirees, workers, small businesses and others into investments that benefit the advisers at the expense of their clients. The consumer's retirement security must come first." The plan to propose the rule again was praised by lawmakers including Sen. Tom Harkin, D-Iowa, Chairman of the Senate Health, Education, Labor and Pensions Committee, and Rep. George Miller, D-Calif, Ranking Member of the House Education and Workforce Committee. "The retirement system is complex, and there are a lot of issues to consider. But the simple fact is that bad investment advice threatens the retirement security of middle class Americans," Harkin and Miller said in a joint statement. "The Department deserves a lot of credit for its efforts to hold advisers to the fiduciary standard Congress intended while taking into consideration the realities of a mature retirement industry. We urge the Department to move forward without delay on [this] reproposal that will provide significantly increased protections for Americans concerned over their retirement security while being both practical and easy to manage." The new proposed rule is expected to be issued in early 2012. Published: Mon, Oct 3, 2011