{"id":141,"date":"2015-03-23T06:14:32","date_gmt":"2015-03-23T13:14:32","guid":{"rendered":"https:\/\/erisa-experts.com\/blog\/?p=141"},"modified":"2016-03-01T13:18:41","modified_gmt":"2016-03-01T21:18:41","slug":"latest-developments-regarding-the-proposed-fiduciary-regulation","status":"publish","type":"post","link":"https:\/\/erisa-experts.com\/blog\/2015\/03\/23\/latest-developments-regarding-the-proposed-fiduciary-regulation\/","title":{"rendered":"Latest Developments Regarding the Proposed Fiduciary Regulation"},"content":{"rendered":"

By Joseph A. Garofolo<\/a><\/p>\n

March has already\u00a0delivered several noteworthy\u00a0developments regarding the proposed fiduciary rule.\u00a0 By way of background, the Department of Labor sent a proposed rule regarding the definition of fiduciary to the Office of Management and Budget (\u201cOMB\u201d) on February 23, 2015.\u00a0 Although the proposed rule has not been made public yet, the Department provided a glimpse of what\u00a0it might look like\u00a0in frequently asked questions\u00a0available on\u00a0the Department’s\u00a0website<\/a>.\u00a0 For example, the Department indicates that it is seeking \u201ca balanced approach that . . . ensures that [investment] advisers provide advice in their client\u2019s best interest, and also minimizes any potential disruptions to all the good advice in the market.\u201d\u00a0 Further, the Department states that the proposed rule \u201cwill not prohibit common compensation practices, such as commissions and revenue sharing[,]\u201d and will include proposed exemptions to restrictions under ERISA and the Internal Revenue Code (the “Code”).\u00a0 Review by\u00a0OMB is a first step and will be followed by the notice-and-comment\u00a0process under the Administrative Procedure Act.<\/p>\n

As\u00a0to the new developments, first,\u00a0nine Republican members of the U.S. Senate Committee on Health, Education, Labor, and Pensions signed a March 10, 2015 letter to the OMB Director generally\u00a0expressing concern that the proposed rule will\u00a0be\u00a0similar to the 2010 proposed rule\u00a0that was withdrawn by the Department in 2011.\u00a0 The\u00a0letter requests that OMB\u00a0consider\u00a011 specific concerns of the Senators.\u00a0 Most of the\u00a0concerns\u00a0revolve around perceived failures of the Department to coordinate with the Securities and Exchange Commission (“SEC”) and other agencies and the possibility that the proposed rule could increase\u00a0the cost of investment-related services\u00a0or reduce the availability of such\u00a0services to ERISA plans and individual retirement accounts (“IRAs”).\u00a0 The letter is available here<\/a>.<\/p>\n

Second,\u00a0Secretary of Labor Thomas Perez\u00a0was questioned about the proposed\u00a0fiduciary rule during\u00a0a March 17, 2015 budget hearing before the\u00a0U.S. House of Representatives Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies.\u00a0 Republican Hal Rogers, the Chairman of the Committee on Appropriations, asked Secretary Perez “how ERISA gives DOL jurisdiction over an individual’s relationship with a personal investment advisor.”\u00a0 In response, Secretary Perez briefly explained the\u00a0roles of the Department and the SEC and referenced a letter that he had sent the previous day responding to an inquiry from the Chairman of the House Committee on Education and the Workforce.\u00a0 Secretary Perez\u00a0also\u00a0stated that “the law gives DOL the authority to define a\u00a0fiduciary under the tax laws\u00a0in the same way as the ERISA definition.”\u00a0 He\u00a0further indicated\u00a0that he has been involved in eight or\u00a0nine\u00a0meetings with SEC Chairwoman Mary Jo White\u00a0relating to the proposed fiduciary rule.\u00a0 A video of the hearing currently is available here<\/a> (the dialogue between Chairman Rogers and Secretary Perez starts at approximately\u00a01:21:52).<\/p>\n

The discussion during the budget hearing highlights the\u00a0potential scope of the proposed fiduciary rule and the impact that it could have not only on 401(k) and other employer-sponsored plans, but also IRAs.\u00a0 The 2010 proposed regulation would have amended the definition of fiduciary for purposes of ERISA and the excise tax on prohibited transactions under Code \u00a7 4975.\u00a0 Code\u00a0\u00a7 4975\u00a0applies to IRAs and contains a definition\u00a0of fiduciary parallel to the one\u00a0found in ERISA \u00a7\u00a03(21)(A).<\/p>\n

Finally,\u00a0several sources, including\u00a0PLANSPONSOR<\/a> and the American Retirement Association<\/a>, are reporting that on March 17, 2015,\u00a0Chairwoman White\u00a0stated that the SEC\u00a0will “implement a uniform fiduciary duty for broker-dealers and investment advisors where the standard is to act in the best interest of the investor.\u201d<\/p>\n

While the extent of further interaction between the Department of Labor and the SEC and the ultimate fate of the proposed\u00a0fiduciary rule remain uncertain, it appears quite likely that the discourse\u00a0surrounding\u00a0the proposed rule\u00a0will\u00a0continue to be politically charged.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Joseph A. Garofolo March has already\u00a0delivered several noteworthy\u00a0developments regarding the proposed fiduciary rule.\u00a0 By way of background, the Department of Labor sent a proposed rule regarding the definition of fiduciary to the Office of Management and Budget (\u201cOMB\u201d) on February 23, 2015.\u00a0 Although the proposed rule has not been made public yet, the Department … <\/a><\/span><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14,12,11],"tags":[],"class_list":{"0":"entry","1":"post","2":"publish","3":"author-jgarofolo","4":"post-141","6":"format-standard","7":"category-401k-plans","8":"category-definition-of-fiduciary","9":"category-erisa-regulations"},"_links":{"self":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/comments?post=141"}],"version-history":[{"count":64,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/141\/revisions"}],"predecessor-version":[{"id":232,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/141\/revisions\/232"}],"wp:attachment":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/media?parent=141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/categories?post=141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/tags?post=141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}