Obama Support for DOL's Fiduciary Proposal Makes It Difficult to Derail, Attorney Says



It's rare that an ERISA regulation becomes a political issue and gets support from the White House, so the Department of Labor's conflict-of-interest proposal is likely to be finalized before the end of President Barack Obama's presidency, a benefits attorney told a conference session.

“It's going to be hard to kill this reg, very difficult,” said Stephen M. Saxon, principal and chairman of the Washington benefits firm Groom Law Group Chartered. 

Saxon said the DOL should re-propose the rule, but he doubted that the department would because of the limited time left in this administration. If the agency can get the rule (RIN 1210-AB32) finalized by May or June of next year, “they have a shot at holding the line and having the reg stay enforceable until the next administration. That doesn't mean folks like myself won't continue to fight against the reg forever.”

The proposal would expand the definition of who is a fiduciary under the Employee Retirement Income Security Act to include individuals who provide advice for a fee or other compensation to a plan, plan fiduciary, participant or beneficiary and owners of individual retirement accounts.

Through the revised definition, the DOL is attempting to assert regulatory authority over IRAs, Saxon said June 8 at the SPARK National Conference.

Sen. Elizabeth Warren (D-Mass.) has requested data on compensation, commissions and related information from about a dozen insurance companies that sell annuities in the retirement services arena, a move that Saxon said was political.

Warren's tactic is designed to shift some of the attention away from areas in the DOL's proposal that many groups have said are problematic, he said.

But many other lawmakers are determined the keep the DOL's proposal in the spotlight. Lawmakers on the House Education & the Workforce Committee have been demanding that the DOL provide proof that it cooperated with the Securities and Exchange Commission before releasing the proposal.


The redefinition of fiduciary would go beyond including those who provide advice to plans, plan fiduciaries and IRA owners, said Thomas Roberts, a principal at Groom Law Group. The definition would also apply if an adviser either directly or indirectly represented to a potential client that he or she is a fiduciary, or provided under an “agreement or understanding” that the advice is individualized for the client, he said.

The definition could mean that many activities that aren't considered fiduciary in nature would become fiduciary acts, Roberts said.

For example, sales presentations involving multiple investment lineups or recommendations, recommending other advice to fiduciaries or investment managers, advice to participants regarding rollovers to IRAs, valuations or fairness opinions and participant education could all be considered fiduciary acts, Roberts said.

By broadening the definition of who becomes a fiduciary, the DOL is “making the whole world a fiduciary, and then they're giving us some carve-outs and exemptions that we can live with. We need to ratchet back to the very beginning of who is a fiduciary,” Saxon said.

Excerpted from a story that ran in Pension & Benefits Daily (06/08/2015).

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