The Department of Labor (DOL) sent a new version of a proposed fiduciary rule to the Office of Management and Budget (OMB) late Sept. 8 for review.
Known officially as “Conflict of Interest in Investment Advice,” it would redefine fiduciary investment advice under ERISA.
According to a post on the OMB’s website, “This rulemaking would amend the regulatory definition of the term fiduciary ...to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code."
American Retirement Association (ARA) CEO Brian Graff said the proposed rule is expected to be publicly released in October.
It would consider advisor practices, plan sponsor and participant expectations, and IRA owners who receive investment advice. It would also consider “developments in the investment marketplace,” including compensation structures that could expose advisors to conflicts of interest.
Additionally, the DOL’s Employee Benefits Security Administration (EBSA) will evaluate available prohibited transaction class exemptions and propose amendments or new exemptions.
"This will be the fourth major attempt by the DOL since 2010 to revamp the 1975 rule," Thomas Clark, JD, LLM, Partner and Chief Operating Officer with the Wagner Law Group, said. "There’s no question the DOL has the authority to regulate in this area. The issue is what are the outer bounds of that authority. We expect the DOL will have carefully crafted this proposed regulation, taking into account the last 13 years of trying, the myriad court decisions, and the rule-making that has been done by the SEC."
The news comes after months of speculation regarding if and when the DOL would propose a revised rule. Just last week, two top Republican lawmakers serving on the House and Senate committees with jurisdiction over ERISA called on the Department of Labor (DOL) to halt any further changes to the definition of fiduciary.
The Aug. 31 letter from Rep. Virginia Foxx (R-NC), who is chair of the House Education and the Workforce Committee, and Sen. Bill Cassidy, M.D. (R-LA), who is the ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, urged Acting Labor Secretary Julie Su to cease any further action to amend the definition of an investment advice fiduciary.
“We write to oppose the Department of Labor’s continuing efforts to promulgate a rule on ‘Conflict of Interest in Investment Advice’ to revise the definition of fiduciary under section 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA),” the lawmakers said.