The Department of Labor’s Employee Benefits Security Administration (EBSA) issued Thursday a proposed rule under the Employee Retirement Income Security Act (ERISA) that broadens the definition of who’s a fiduciary when giving investment advice to an employee benefit plan or a plan’s participants.
Phyllis Borzi, Assistant Secretary of EBSA, told reporters on a conference call on Thursday that the proposed rule was designed to clarify who was a fiduciary under ERISA.
“Fiduciary status is fundamental to ERISA’s framework for protecting the interests of plan participants and the statute contains a broad functional test for determining who’s a fiduciary” when providing investment advice, Borzi said. While ERISA is “very simple and straightforward” about who’s a fiduciary in stating that it’s “someone who renders investment advice for a fee or other compensation, direct or in direct, with respect to any monies or other properties of the plan,” a 1975 regulation issued by DOL and certain interpretations since then have taken “a much narrower approach” to defining fiduciary, Borzi said.
The current rule regarding fiduciary, she continued, “simply is not working.” The “dramatic evolution in the marketplace” coupled with “the enforcement activities that the DOL has undertaken both in our investigations and our litigation over the past three decades have made it perfectly clear that these arcane rules really interfere with the ability of the Department and fiduciaries to understand where the lines are being drawn, and to protect beneficiaries and participants.”