December 09, 2009
--- Assistant Secretary of Labor Phyllis C. Borzi suggested today that the
rules governing fiduciary status might allow too much leeway for
advisers to retirement plans. ---
During a Q&A Web chat, Borzi said the Employee Benefit Security Administration (EBSA) is re-examining the Employee Retirement Income Security Act’s five-part test of fiduciary status. “We are concerned that it allows advisers from whom plans expect impartial advice to evade fiduciary responsibility,” she wrote. “The nature of investment advice services has changed since the regulation was issued in 1975 and we question whether it continues to accomplish its purpose in an effective manner.”
Borzi also handled several inquiries about EBSA’s efforts to revamp a Bush Administration-era rule governing the providing of retirement plan investment advice (see “EBSA Pulls Back Controversial Advice Mandate”). She repeated earlier statements that the Obama Administration Labor Department felt the existing rule overshot the intentions of Congressional lawmakers.
“A number of concerns were raised (in public comment) regarding the scope of the original regulation,” Borzi said. “Our proposal will be much closer to the statutory exemption enacted by Congress. In particular, we are concerned that the proposed regulation had permitted conflicted advice in a way that Congress had not intended when it carefully crafted legislation on the question.”
She continued in answer to another questioner: “Accordingly, the regulated community should expect a proposal which more closely follows the intent of Congress in establishing a statutory exemption from the conflict of interest provisions of (Employee Retirement Income Security Act) ERISA.”
Borzi addressed several other topics, including fee disclosure regulations and target-date funds (see "EBSA: Look for Fee Disclosure Regs in May").
An archive of the entire Q&A session is available here.
A document summarizing the DoL’s full regulatory agenda is available here.
Fred Schneyer