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  2. REGULATION AND LEGISLATION
August 12, 2015 01:00 AM

Speakers encourage fiduciary role for advice on DC lump sums, IRA rollovers

Hazel Bradford
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    People giving advice to defined contribution plan participants about lump-sum distributions and rollovers to individual retirement accounts should be covered by a new fiduciary standard, several speakers said Wednesday at a Department of Labor hearing on the proposed rule.

    “Many of our plan sponsors have expressed concern with these practices,” said Edward Moslander, senior managing director, institutional relationship management, TIAA-CREF. “Extending the same fiduciary framework to distribution advice could ensure each participant’s best interest is being served.”

    Mr. Moslander also argued for an education-only exemption broad enough to allow for informing participants about guaranteed lifetime income options.

    The potential for improper rollover advice is a particular problem at the $440 billion Federal Thrift Savings Plan in Washington, said Richard Thissen, national president of the National Active and Retired Federal Employees Association. More than 50% of TSP participants transferred a total of $9 billion into higher-fee accounts within one year of leaving government service, “which speaks strongly to the bad advice being given to federal employees and retirees,” Mr. Thissen said.

    A package of proposed new exemptions, including a best-interest contract, “succeeds in mitigating the impact of conflicts while preserving substantial flexibility for institutions,” said Maria Freese, senior policy adviser for the Pension Rights Center.

    As several insurance and retirement service providers questioned whether an expanded fiduciary definition would make their lines of business too complicated or unprofitable, Timothy Hauser, deputy assistant secretary of labor for program operations, said, “People were describing it as unworkable before they even saw the text” of the proposal.

    Several witnesses urged DOL officials to make a distinction between retail and institutional investors. Jean-David Larson, director of regulatory and strategic initiatives for Russell Investments, also encouraged DOL officials to expand the possibility of creating multiple-employer plans.

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