The Department of Labor’s (DOL) proposed rule defining who is an investment advice fiduciary for purposes of the Employee Retirement Income Security Act (ERISA) has now been officially published in the Federal Register.
The DOL also published Nov. 3 the proposed amendments to Prohibited Transaction Exemption 2020–02 (Improving Investment Advice for Workers & Retirees) and to several other existing administrative exemptions from the prohibited transaction rules applicable to fiduciaries under Title I and Title II of ERISA.
Why is this significant? It now starts the timeline for when comments on the proposed regulation are due, which is 60 days after the publication date or by Jan. 2, 2024.
The DOL also indicated that it anticipates holding a public hearing approximately 45 days following the date of publication in the Federal Register, which would put the date right around Dec. 18. However, specific information regarding the date, location and submission of requests to testify at the hearing will be published later.
The president during a White House ceremony on Oct. 31 announced the proposed new guidance, which notably includes a requirement that 401(k) plan-level protection extend to small business owners and participants—something which the American Retirement Association strongly supports.
As the ARA noted in an earlier post, the SEC’s Regulation Best Interest (Reg BI) currently does not extend to recommendations to plan sponsors. While larger plan sponsors generally have access to the expertise and support of professional retirement plan advisors, an advisor who sells a small employer a 401(k) and has no further action (on-time interaction) with the plan or its participants is not, until this point, required to provide investment advice protection under ERISA’s five-part test.
To that end, the DOL notes in the preamble of the proposed rule that it is “designed to ensure that ERISA’s fiduciary standards uniformly apply to all advice that retirement investors [i.e., a plan, plan fiduciary, plan participant or beneficiary, IRA, IRA owner or beneficiary, or IRA fiduciary] receive concerning investment of their retirement assets in a way that ensures that retirement investors’ reasonable expectations are honored when receiving advice from financial professionals who hold themselves out as trusted advice providers.”
Links to the proposed guidance, as well as the proposed PTE amendments are below.
Proposed Retirement Security Rule
https://www.govinfo.gov/content/pkg/FR-2023-11-03/pdf/2023-23779.pdf
Proposed Amendment to PTE 2020–02
https://www.govinfo.gov/content/pkg/FR-2023-11-03/pdf/2023-23780.pdf
Proposed Amendment to PTE 84–24
https://www.govinfo.gov/content/pkg/FR-2023-11-03/pdf/2023-23781.pdf
Proposed Amendment to PTEs 75–1, 77–4, 80–83, 83–1, and 86–128
https://www.govinfo.gov/content/pkg/FR-2023-11-03/pdf/2023-23782.pdf
- Log in to post comments