The Department of Labor's (“DOL”) Employee Benefits Security Administration has proposed: “a new rule that would protect workers' retirement savings by updating the regulation defining a fiduciary under the Employee Retirement Income Security Act (ERISA).”
As described on the DOL’s dedicated Webpage: “The ‘Retirement Security Rule: Definition of an Investment Advice Fiduciary’ would affect how investors get advice on their job-based retirement accounts and other retirement savings plans and how investment advice providers must act if they have a conflict of interest…. The proposed rule and related proposed amendments to prohibited transaction exemptions (PTEs) detail when advice providers are acting in a fiduciary role under federal pension laws and explain the conditions they must follow to protect retirement investors.” The proposal was announced in an October 31 Press Release.
Details
The DOL observes that: “Many people who give investment advice and get paid for it are currently not considered investment advice fiduciaries under ERISA. Investment advice fiduciaries legally must follow strict rules of conduct.[] Under these proposals, investment advice fiduciaries would:
· give advice that is prudent and loyal.
· avoid misleading statements about conflicts of interest, fees, and investments.
· follow policies and procedures designed to ensure the advice given is in an investor's best interest.
· charge no more than is reasonable for their services.
· give investors basic information about any conflicts of interest.”
Basis for the Proposed Rule
Says the DOL: “EBSA's mission is to protect the job-based retirement, health and other welfare plan benefits of America's workers and their families. Requiring investment advice providers to comply with fiduciary standards protects retirement investors from harmful conflicts of interest. Conflicts of interest can put an investment advice provider in the position of choosing between what's good for them and what's best for you. That could result in excess fees and/or lost investment returns that reduce a person's retirement savings.[] The existing definition is from 1975 and doesn't work in today's marketplace. Investors who are making decisions for their retirement accounts expect advice to be in their best interest — so, it should be.”
Ample Support Materials
The Department provides substantial support materials, including: a Fact Sheet; a blog; and a video. There are also links to key documents: Proposed Retirement Security Rule; Proposed Amendment to PTE 2020-02; Proposed Amendment to PTE 84-24; and Proposed Amendment to PTEs 75-1, 77-4, 80-83, 83-1, and 86-128.
