The Department of Labor’s proposal to redefine who counts as a fiduciary under the Employee Retirement Income Security Act overreaches, capturing many people who should not be reasonably considered fiduciaries under ERISA or the Internal Revenue Code, ABA said in a comment letter today. By taking such an overbroad approach, DoL’s proposal would fundamentally disrupt familiar and productive customer relationships, at significant cost and without achieving DoL’s goals.
“If adopted in its current form, the proposal is likely to harm the very plan participants, beneficiaries, and IRA account owners that the department is seeking to protect by making it extremely difficult, complex, and costly — and in some cases, impossible — for banks to make available and deliver the products, services, and information necessary, helpful, and appropriate for achieving a financially sound retirement,” ABA said.
The proposed 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.
While the rule would reduce the retirement advice available to consumers, ABA explained, it would also dramatically reshape — with no basis in evidence — financial providers’ relationships with institutional investors, who are sophisticated and who should not be targeted by a rulemaking designed to address retail investors. ABA urged DoL to withdraw the proposal and better target its regulatory objectives. For more information, contact ABA’s Tim Keehan.