DOL Proposed Regulations 


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    UPDATE: DOL Proposed Fiduciary Rule Released (April 2015)
    On April 14th, the OMB publicly released the Department of Labor’s long-awaited proposed rule to amend the definition of “fiduciary” under the Employee Retirement Income Security Act (ERISA), strengthening standards for individuals providing investment advice to a retirement plan, its participants or beneficiaries. This proposed rule replaces a similar proposal by the DOL from 2010. There is a 75-day comment period, followed by a public hearing with the record reopened for comment after the hearing.

    Major provisions of the rule include:

    • The proposed rule clarifies and rationalizes the definition of fiduciary investment advice. Specifically, a fiduciary is any individual (including brokers, RIAs, insurance agents or other types of advisers) receiving compensation for providing investment advice for consideration in making retirement investment decisions that are individualized to, or specifically directed to, an employee benefit plan, plan fiduciary, participant or beneficiary.
    • The proposed rule creates specific carve-outs for particular types of communications that are best understood as non-fiduciary in nature, such as order-taking. For example, it creates a “seller’s carve-out” which would not treat arm’s length transactions where there is generally no expectation of fiduciary investment advice as fiduciary advice, provided that the carve-out’s specific conditions are met. It creates carve-outs for general retirement education, sales pitches to plan fiduciaries with financial expertise, and other carve-outs, provided the conditions outlined in the rule are met.
    • Generally, individuals providing fiduciary investment advice may not receive payments creating conflicts of interest without a prohibited transaction exemption. The DOL is proposing new and revised exemptions from the prohibited transaction rules of ERISA and the Code that are broad, principles-based, and adaptable to changing business practices.
    • The “best interest contract exemption” would allow an adviser and firm to receive commissions and revenue sharing provided that they (among other requirements) expressly agree to provide advice that is in the “best interest” of the advice recipient. The firm must have adopted policies and procedures reasonably designed to mitigate any harmful impacts of conflicts of interest, and disclose basic information on their conflicts and the cost of their advice.
    • The “principal transaction exemption” would allow advisers to recommend certain fixed-income securities and sell them to the investor from the adviser’s own inventory, as long as the adviser adheres to the exemption’s consumer-protective conditions.
    • The DOL is also requesting comments on a “low-fee exemption” that would allow firms to accept payments that would otherwise be deemed conflicted when recommending the lowest-fee products in a given product class.

    Read a fact sheet and FAQs from the DOL on the proposed rule, which includes information on how this rule differs from the 2010 proposal.

    UPDATE: DOL Fiduciary (February 2015)
    Rep. Ann Wagner, R-Mo., introduced a bill that would force the DOL to delay action on a fiduciary rule for retirement account advisers until the SEC takes action on a similar proposal. In addition, the bill would lay out cost-benefit standards for the SEC to use in its rule-making process. This comes shortly after President Obama pushed the DOL to move forward with their proposed fiduciary rule. The DOL rule is currently with Office of Management and Budget for review, before it’s made public. The AICPA supports an elevated standard; we are monitoring developments and will keep you apprised on the latest.

    UPDATE: DOL and SEC Fiduciary Rules (February 2015)
    President Obama is pushing the Department of Labor to move forward with their proposed fiduciary rule, strengthening standards for brokers overseeing retirement accounts. The rule was proposed by the DOL in November 2010, and has faced industry opposition. The DOL is expected to submit the proposal for review by the OMB soon. Additionally, SEC chief Mary Jo White said last week that that she expects to voice her opinion on the idea of giving brokers a fiduciary mandate "in the short term." White indicated that it didn't matter when the DOL took action on a similar initiative, because the Labor Department rule and a possible SEC rule would be separate.

    UPDATE: DOL to Re-Propose Fiduciary Definition (September 2011)
    The DOL announced on September 19th that it will re-propose its rule on the definition of a fiduciary, after facing strong industry opposition. The new proposed rule is expected to be issued in early 2012, after soliciting additional industry input and researching further. According to a DOL press release, “the agency anticipates revising provisions of the rule including, but not restricted to, clarifying that fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals and clarifying the limits of the rule's application to arm's length commercial transactions, such as swap transactions. Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers….” Read the full press release.

    UPDATE: DOL Extends Applicability Dates for Retirement Plan Fee Disclosure Rules (July 2011)
    On July 13th, the DOL issued a final regulation extending and aligning the applicability dates for its retirement plan fee disclosure rules.

    First, the DOL further extended the effective date of its interim final regulation under Section 408(b)(2) of ERISA. This rule requires covered service providers of retirement plans to disclose comprehensive information about their fees and potential conflicts of interest to ERISA-covered plan fiduciaries. This regulation was to become effective with respect to plan contracts or arrangements for services in existence on or after January 1, 2012 (the original deadline of July 16, 2011 had previously been extended), but the final regulation issued July 13th pushed the effective date to April 1, 2012.

    Additionally, the DOL extended the applicability date of fiduciary requirements for disclosure in participant-directed individual accounts. The final rule was issued on October 20, 2010, with an original applicability date of November 1, 2011. Additionally, the regulation contained a 60-day transition rule that permitted initial compliance no later than 60 days after the beginning of the first plan year on or after November 1st. The final rule issued July 13th retains a modified version of the 60-day transition rule that works in conjunction with the new effective date of the 408(b)(2) regulation. The deadline is now the later of (i) 60 days after the first day of the plan year beginning after November 1, 2011, or (ii) 60 days after the effective date of the 408(b)(2) rule.

    Read the DOL’s press release and the final regulation.

    UPDATE:  DOL Notice of Proposed Extension of Applicability Date (June 2011)
    On June 1st, the DOL proposed extending the applicability date of fiduciary requirements for disclosure in participant-directed individual accounts. Comments on the proposal are due on or before June 15, 2011. The final rule was issued on October 20, 2010, with an applicability date of November 1, 2011 (see update below dated October 2010). Note that the AICPA commented on the proposed rule in August 2008. The final regulation addresses disclosure of certain plan and investment-related information, including fee and expense information, to participants and beneficiaries in participant-directed individual account plans (e.g., 401(k) plans). This regulation is intended to ensure that all participants and beneficiaries in participant-directed individual account plans have the information they need to make informed decisions about the management of their individual accounts and the investment of their retirement savings. Note that the disclosure rules do not extend to IRA-based plans under IRC section 408, including simplified employee pensions (SEPs) and simple retirement accounts (SIMPLEs) already subject to disclosure regimes under the code, which is consistent with the AICPA’s recommendations.

    UPDATE: DOL Proposes Fiduciary Definition Expansion (January 2011)
    In November 2010, the Department of Labor proposed a broader definition of an ERISA fiduciary, which would include the provision of advice to IRA and HSA holders. The DOL says that their proposed rule would “protect beneficiaries of pension plans and individual retirement accounts by more broadly defining the circumstances under which a person is considered to be a ‘fiduciary’ by reason of giving investment advice to an employee benefit plan or a plan's participants.”

    The proposal includes a new, significantly broader two-part test for the ERISA definition of “fiduciary,” and removes the requirement that advice be on a regular basis. The first prong expands the types of advice to include the provision of appraisals and fairness opinions concerning the value of a security of property, making purchase/sale recommendations, or advising on the management of securities. The second prong would encompass any person acknowledging it is acting as a fiduciary, exercising discretionary authority, providing individualized investment advice, or being a registered investment adviser.

    The rule would extend to anyone who provides investment advice to a “plan, plan fiduciary or plan participant or beneficiary,” and receives a fee for giving that advice, regardless of the frequency.

    Read the proposed rule. Written comments on the proposed regulations should be submitted to the DOL no later than February 3, 2011.  Furthermore, the DOL will hold a public hearing in Washington D.C. on March 1, 2011 and, if necessary, March 2, 2011, on the proposed rule.

    UPDATE: DOL Issues Final Regulation Regarding Fiduciary Requirement for Disclosure in Participant-Directed Individual Account (October 2010)
    On October 20, 2010, a final rule was issued regarding fiduciary requirements for disclosure in participant-directed individual account plans, with an effective date of December 2010. Note that the AICPA commented on the proposed rule in August 2008. The final regulation addresses disclosure of certain plan and investment-related information, including fee and expense information, to participants and beneficiaries in participant-directed individual account plans (e.g., 401(k) plans). This regulation is intended to ensure that all participants and beneficiaries in participant-directed individual account plans have the information they need to make informed decisions about the management of their individual accounts and the investment of their retirement savings. Note that the disclosure rules do not extend to IRA-based plans under IRC section 408, including simplified employee pensions (SEPs) and simple retirement accounts (SIMPLEs) already subject to disclosure regimes under the code, which is consistent with the AICPA’s recommendations.

    UPDATE: Issuance of DOL Proposed Regulation on Investment Advice for Participant-Directed ERISA Plans and IRAs (February 2010)
    On February 26, 2010, the US Department of Labor released a proposed regulation providing guidance on the statutory prohibited transaction exemptions to ERISA and the Internal Revenue Code (Code), which were created by the Pension Protection Act of 2006. The proposed rules replace a prior, final regulation which was withdrawn last November in response to concerns related to the rules’ treatment of a fiduciary adviser’s conflicts. The proposed rule differs from the earlier version in two important aspects. In general, the proposal implements ERISA 408(b)(14) , 408(g) and Code section 4975, which enable a “fiduciary adviser” (e.g., registered investment adviser, bank, insurance company, broker-dealer, and its affiliates or representatives) to provide investment advice to plan participants so as to not violate prohibited transaction rules. (In general, anytime one is providing investment advice to a plan participant of an ERISA account or IRA, they are acting as an ERISA or Code “fiduciary” and thus should be mindful of these rules). 

    ADVOCACY: AICPA Comments on the DOL's Proposed Regulation on 401(k) Plan Investment Advice (October 2008)
    The AICPA has commented on the DOL's proposed regulation concerning the prohibited transaction exemption for the provision of investment advice under an "eligible investment advice arrangement," as defined by the PPA of 2006.

    Update: The final DOL regulation has been withdrawn.

    ADVOCACY: AICPA Comments on the DOL's Proposed Regulation on Fiduciary Requirement for Disclosure in Participant-Directed Individual Account Plans (August 2008)
    The AICPA has commented on the Prop. Reg. section 2550.404a-5, which addresses fiduciary requirements for disclosure on participant-directed individual account plans.




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