Advocates and foes of a proposed Department of Labor regulation to broaden the definition of who is considered a fiduciary pitched their opinions to an Employee Benefits Security Administration public hearing Tuesday, with some decrying the proposal’s costs while others said it was long overdue.
In his prepared testimony before the EBSA, Kent Mason, partner with law firm Davis & Harmon and representing the American Benefits Council, said the proposal will have a “very adverse effect on retirement savings by raising costs and inhibiting investment education and guidance for plan participants.”
“We understand the desire of the department to update and improve the regulatory definition of fiduciary,” he said in a news release. “However, we believe that the proposed regulation creates too broad a definition.”
Charles Nelson, president of Great-West Retirement Services, said in prepared testimony that he supports parts of the regulation but finds other parts ambiguous. He said it would “dramatically increase costs to 401(k) participants and sponsors” and will “substantially” curtail plan distribution communication, education and counseling.
Brian Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, said in prepared testimony that the proposal “would provide needed clarity in terms of whether plans are receiving ERISA-covered investment advice.”
However, in testimony filed jointly with the Council of Independent 401(k) Recordkeepers and the National Association of Independent Retirement Plan Advisors, ASPPA also said disclosures required for commission-based brokers/advisers in the proposal are “over broad and unduly harsh.” The three organizations also believe the new regulation should not apply to individual retirement accounts.
If the regulation is approved as proposed, Mr. Graff said, “players in the retirement industry who are more formally regulated with extensive compliance departments will comply with the rules, and those less formally regulated who know there is no practical enforcement of the rules, will choose not to comply,” giving them a competitive advantage over firms that are in compliance.
It has been 35 years since the regulation was updated.
Testimony is scheduled to continue Wednesday.