The Department of Labor today re-proposed a rule redefining who counts as a fiduciary under the Employee Retirement Income Security Act. The rule would expand the types of retirement advice subject to fiduciary duty to cover anyone receiving compensation for advice that is “individualized or specifically directed” to a retirement plan sponsor, plan participant or individual retirement account owner.
Brokers, registered investment advisers, insurance agents and other advisers would be covered by the fiduciary definition, DoL said. However, the rule includes a carveout for advisers providing investment education to IRA owners. The rule would not cover situations when a customer calls a broker with instructions to purchase a particular investment.
The department also proposed creating a “best interest contract exemption” that it said would be adaptable and “principles-based” in order to minimize compliance costs. Under the proposed exemption, firms may continue their current compensation practices if they contract with their clients to provide advice in the clients’ best interests and disclose any potential conflicts.
ABA is closely reviewing and analyzing the proposed rule to determine its effects on member banks involved in the retirement services area. Comments on the proposed rule will be due 75 days after the rule is published in the Federal Register. For more information, or to participate in ABA’s comment letter process, contact ABA’s Tim Keehan.