“Democracy is messy, and it’s hard. It’s never easy.”
American Retirement Association CEO Brian Graff quoted Robert Kennedy to describe the current political environment and its potential effect on retirement plan savers and advisors.
Graff, who kicked off the opening keynote general session at the NAPA 401(k) Summit in Nashville, Tenn., Sunday morning, was joined onstage by a high-profile roster of Washington, D.C. regulators, staffers, and consultants to examine rules and regulations that are (and could) impact the retirement plan space.
Graff introduced the Department of Labor’s Assistant Secretary of the Employee Benefits Security Administration (EBSA) Lisa Gomez, and immediately asked about the Retirement Security Rule, the DOL’s latest attempt to implement an investment advice fiduciary rule.
"It’s just a little rule that we’re working on," Gomez said with a smile. “Yeah, it’s been very boring over there at EBSA.”
She said the rule is attempting to accomplish several objectives from a policy perspective. The first reflects the vast differences in the retirement investment landscape since 1975, when a definition regarding who a fiduciary is when providing investment advice first appeared.
“At that time, 401(k)s did not even exist,” she noted. “Most people were in defined benefit plans, and those plans were managed by professional investment managers. Now we have so many 401(k) plans, an individual account plan, that’s really the dominant vehicle that retirees use to save for retirement. In those plans, most of these individual retirees are the ones who are making investment decisions. It’s just a completely different landscape.”
For that reason, EBSA is “very focused” on releasing a rule that takes those differences into account—the change in landscape and the need to protect retirement investors from harmful conflicts of interest and imprudent investment recommendations.
“If you are a retirement investor and talking with a financial professional trying to get investment advice, you have to have trust and confidence that that professional knows what they’re talking about, knows what your individual circumstances are, and will give you advice that’s in your best interests,” Gomez continued. “That’s really the core of the rule and what we’re trying to get at from a policy perspective while understanding the nuances and the different things that need to be taken into consideration in delivering on that promise for retirement investors.”
Graff noted NAPA’s support for the proposed rule—and previous versions of the proposed rule—which would modernize the definition of investment advice.
“We think that anyone giving advice to a plan sponsor should always be subject to ERISA,” Graff said. “But what’s different about this proposal rollout is that this is the first time the Department and the Administration have emphasized the importance of having ERISA-protected advice to plan sponsors.”
“I’d like to say that coming from my plan sponsor background, we want to make sure that they’re not forgotten,” Gomez responded. “With respect to this rule, we really recognize that plan sponsors—plan fiduciaries—are retirement investors as well. While some plan fiduciaries may know more about investments, and may be investment professionals themselves, many people are also putting their trust in a professional investment advisor to tell them how best to invest the assets of a plan. As fiduciaries, they need that help in the same way that an individual investment advisor would need their help.”
Graff then pivoted and asked Gomez about cybersecurity.
“This has been a really big initiative with the Department of Labor and EBSA,” she said. “The information you all have about participants and beneficiaries is some of the most important, critical, sensitive information. We’re finding that too often, on the pension side, there was not as much attention to cybersecurity and protecting this information. We are still, as part of enforcement, looking at what plans are doing or not doing in light of the best practice standards. We’re now looking at what we’ve done in enforcement to see whether we need to adjust those standards. Questions have come up in the enforcement context, and we feel there might be more information needed.”
“It’s definitely something that plan fiduciaries need to focus on from a documentation and process standpoint.”
- Log in to post comments