The Department of Labor's Employee Benefits Security Administration is working on several rules related to SECURE 2.0, but arguably the biggest item on its latest semiannual regulatory agenda concerns fiduciary investment advice.
The agenda outlines EBSA's short-term and long-term priorities and notes it's working on six items in the pre-rule stage, 10 in the proposed rule stage and five in the final rule stage.
Chief among the priorities is the Retirement Security Rule proposal that EBSA released on Oct. 31. The proposal would amend the definition of the term "fiduciary" and require rollover advice be in the best interest of the saver.
"Many protections, duties, and liabilities in ERISA hinge on fiduciary status; therefore, the determination of who is a fiduciary is of central importance," EBSA said in its agenda under a "statement of need" subhead. "The department's existing regulatory definition of an investment advice fiduciary, adopted in 1975, established a five-part test for status as a fiduciary. The 1975 regulation's five-part test is not founded in the statutory text of ERISA, does not take into account the current nature and structure of many individual account retirement plans and IRAs, is inconsistent with the reasonable expectations of plan officials and participants, and IRA owners who receive investment advice, and allows many investment advice providers to avoid status as a fiduciary under federal pension laws."
The proposal has already drawn stiff criticism from industry stakeholders who say it is a rehash of a similar 2016 rule that was struck down in court and will ultimately hurt financial professionals and savers.
EBSA will hold a hearing starting Dec. 12 for interested parties to provide feedback on the proposal. The official comment period ends Jan. 2 and EBSA has already denied a request to extend it.
The department also noted that it's continuing work on a host of initiatives related to SECURE 2.0, a comprehensive retirement security bill Congress passed in December 2022.
In August, EBSA unveiled a lengthy request for information that covers nine disclosure-related sections of SECURE 2.0, including provisions on pooled employer plans, emergency savings accounts and paper benefit statements.
The department in its agenda also noted that it will soon release a report to Congress reviewing its Interpretive Bulletin 95-1, guidance promulgated in 1995 that relates to the fiduciary standards under the Employee Retirement Income Security Act of 1974. IB 95-1 outlines the process plan fiduciaries must take when executing a pension risk transfer, and Congress in SECURE 2.0 directed EBSA to give it a fresh look. The report is due this month.
