Goldbrum said the Department of Labor’s Employee Benefits Security Administration (EBSA) should rework its current proposed rule and re-release it. “We urge EBSA to take measured steps in changing the definition of fiduciary and what constitutes investment advice for retirement plans,” Goldbrum testified, according to his prepared remarks. “We believe that significant changes to the Proposal are needed and that the retirement plan community would benefit greatly if EBSA reproposed a modified rule.”
Goldbrum touched on one theme also dealt with by other witnesses – that whatever EBSA decides to do, the rule should be as precise as possible and include as much guidance as possible for practitioners trying to implement. “Any change to the definition of fiduciary must be clear and precise. It is crucial that service providers are able to structure their products, services, and compensation arrangements with reasonable certainty about whether they will be a fiduciary with respect to a plan.” Goldbrum declared. “Absent clear and precise guidance, service providers will be at substantial risk of unintentionally and unwillingly becoming fiduciaries and engaging in prohibited transactions. Unfortunately, the Proposal includes broad changes that are unclear and will result in substantial unintended consequences.”
Goldbrum warned that lawyers who have filed numerous lawsuits in recent years over allegations of excess plan fees and other issues will likely continue flocking to the retirement plan space because of the new rule. “Service providers should not be subject to the significant risk that an arrangement to provide non-fiduciary products and services will be treated, after the fact, as a fiduciary services arrangement,” Goldbrum testified. “Class action attorneys have discovered retirement plans as potentially fertile grounds for large settlements from perceived deep pocket defendants, typically large plan sponsors and service providers. Although these lawyers have had limited success on the merits of their cases, an increased threat of litigation, and the costs associated with defending against them, will have a significant chilling and negative effect on the retirement plan community.”
Finally, Goldbrum repeated a warning regulators had heard from other witnesses – that many providers will exit the retirement plan space rather than take the chance of running afoul of the new fiduciary rules.
Goldbrum’s remarks are here.