Labor Department officials are scrutinizing potential conflicts of interest when pension consultants with fiduciary responsibilities also manage a plan’s assets or recommend themselves for that role.
In a Sept. 24 letter to Rep. George Miller, D-Calif., the ranking Democratic member of the House Education and the Workforce Committee, Assistant Secretary Phyllis Borzi said her agency, the Employee Benefits Security Administration, “has long been aware of the potential for conflicts by pension consultants as a result of the position they have with plans and the advice and recommendations that they provide.”
In scenarios where a pension fund consultant acting as a fiduciary recommended itself as a money manager, “it could be in violation of ERISA,” Ms. Borzi said, adding that the EBSA routinely examines relationships when it investigates 401(k) plans. It has also increased service providers’ disclosure of conflicts of interest and coordinated conflict of interest advice with the Securities and Exchange Commission.
Ms. Borzi’s letter was in response to a request from Mr. Miller in May that the EBSA “take a careful look at these practices and take appropriate action to prevent harm to participants.” In a statement Tuesday, Mr. Miller said he is “hopeful that the steps DOL is taking will sufficiently address this issue,” but stressed the need for continued vigilance.
EBSA officials hope to propose a new conflict-of-interest rule in early 2015 that would address such situations, Ms. Borzi said.