- The White House Office of Management and Budget received Friday a U.S. Department of Labor proposed rule that would amend the definition of fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code, according to OMB’s website. The rule is generally expected to expand coverage to more individuals involved in employer-sponsored retirement plans.
- The proposal represents DOL’s first attempt at amending the fiduciary definition in eight years. In 2015, the Obama administration’s DOL finalized a fiduciary rule that it said aimed to mitigate conflicts of interest among retirement advisors. After a series of lawsuits, however, the 5th U.S. Circuit Court of Appeals vacated the rule before DOL began enforcement.
- DOL previously said the rule was needed to “more appropriately define” when persons who provide investment advice for a fee to employee benefit plans and individual retirement accounts are fiduciaries.
The latest attempt at crafting a fiduciary rule proceeds amid partisan scrutiny of DOL rulemakings in recent weeks.
Late last month, Rep. Virginia Foxx, R-N.C., and Sen. Bill Cassidy, R-La., wrote a letter to acting Secretary of Labor Julie Su calling on DOL to cease work on the proposal. The lawmakers said DOL’s “shifting interpretations” regarding fiduciaries “created unnecessary instability for retirement plans, retirees, and savers.”
DOL’s fiduciary regulations under ERISA, first issued in 1975, articulate a five-part test for determining when recommendations are considered fiduciary investment advice.
In the abstract of its latest rulemaking effort, the agency said its amendment to the fiduciary definition would account for a variety of factors, including:
- The practices of investment advisors.
- The expectations of plan officials and participants, as well as IRA owners who receive investment advice.
- Developments in the investment marketplace.
Namely, DOL said it would consider the ways in which advisors are compensated, including those that “subject advisers to harmful conflicts of interest.”