Phyllis C. Borzi, assistant secretary of labor for the EBSA, on Tuesday defended her agency's proposal to update the definition of a fiduciary against calls from industry representatives and Capitol Hill to start over.
Ms. Borzi told the House Education and Workforce Subcommittee on Health, Employment, Labor and Pensions that while the fiduciary definition is a linchpin of ERISA regulation and enforcement, “it's also the most outdated” because it doesn't address the current retirement investment marketplace.
“We want to be sure that the underlying principle of ERISA — to protect against conflicts of interest — is adhered to,” she said. “What this is all about is accountability.”
The Employee Benefits Security Administration will perform additional economic impact analysis to address concerns raised by the financial industry over additional costs and reduced investment options, but has no plans to delay rule making, Ms. Borzi said.
“We're committed to developing a rule that doesn't cause undue disruption, but at the same time we need to correct a serious problem” caused by an existing regulation so narrow “that much of what is plainly advice about investments is not treated as such under ERISA,” she said at the hearing. She added the EBSA is working closely with regulators at the SEC and CFTC to avoid crossed signals as Dodd-Frank rules are developed. “We're not rushing ahead. It's more important to get this right.” she told the panel.
Bradford P. Campbell, previous assistant labor secretary and now an attorney with the law firm of Schiff Hardin, warned after the hearing Tuesday that there would be legal challenges to the final rule if the EBSA doesn't heed calls to start over. He noted that both Democratic and Republican members of the House and Senate question the rule making.
The EBSA “has managed to achieve something no one else in Washington has — true bipartisan agreement,” Mr. Campbell said.