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Wednesday, February 12, 2014
enforcement efforts of the Department of Labor's Employee Benefits Security
Administration achieved nearly $1.7 billion in monetary results during the 2013
fiscal year, Phyllis C. Borzi, assistant secretary of labor for EBSA, told
conference attendees at a Feb. 7 presentation.
she noted that not all of the $1.7 billion represented “money restored to
participants,” Borzi called this a “huge recovery for a relatively small
agency also closed 320 criminal investigations in fiscal year 2013, with these
cases resulting in 88 indictments, Borzi said.
spoke about EBSA's priorities and initiatives in the coming year at a session
of the 2014 Midwinter Meeting of the American Bar Association Section of Labor
and Employment Law Employee Benefits Committee. The conference was held in New
respect to EBSA's 2014 regulatory agenda, Borzi said that the agency's “most
important regulatory priority” continues to be the re-proposal of the
conflict-of-interest rule, which is expected to redefine the term fiduciary.
pointed to the changed nature of retirement savings and the deficiency in
financial literacy throughout the country as reasons why an updated fiduciary
definition was important.
said that, given the shift from defined benefit to defined contribution plans,
“people have to be their own financial advisors.” This makes it even more
important for individuals to receive reliable and impartial financial advice,
she said, adding that studies show that many people lack the financial literacy
to manage their retirement savings.
said that while tax code Section 401(k) plans are “excellent savings
opportunities,” they can be poor vehicles for retirement planning, because it's
fairly easy for participants to withdraw money prior to retirement.
these factors, Borzi said the conflict-of-interest rule was important, because
individuals need access to competent and unbiased advice with respect to their
are scared and they need advice,” Borzi said. “They need to know that when they
hire someone to help them navigate these difficult and confusing decisions,
that the person they hire has their best interests at heart.”
a fiduciary isn't a “guarantor of results,” Borzi said, it still must be
“single-minded in purpose” and act in the best interest of its clients.
Borzi didn't identify a specific timeframe for the release of the re-proposal,
she said that the agency currently is working on enhancing the economic
analysis underpinning the rule.
she said that the re-proposal will reflect a better understanding of the
compensation practices of the financial services industry.
also suggested that the agency may propose one or more prohibited transaction
exemptions to address some of the compensation practices currently being used
in the industry. However, she cautioned that, “we're not grandfathering
everything that currently goes on.”
enforcement side, Borzi said that EBSA recently started two pilot projects that
may be elevated to national enforcement projects in the future.
first, which Borzi called the prohibited persons pilot project, seeks to track
individuals in the service provider community who have a history of misconduct.
“there really isn't any mechanism for us to track these people, so they become
repeat offenders,” Borzi said.
The goal of the project, Borzi said, is to ensure that small and medium
businesses “don't get lured into hiring somebody to provide services to them
who's already proven to be someone who's not in compliance with the law.”
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