Retirement service providers should be more careful to tell plan sponsors and participants when they are and are not acting as fiduciaries, and, when they are acting as fiduciaries, they should avoid highlighting their own products.
Officials at the U.S. Government Accountability Office (GAO) make those recommendations in a report on retirement plan fiduciaries prepared at the request of Rep. George Miller, D-Calif., the highest-ranking Democrat on the House Education and the Workforce Committee.
The GAO officials looked at efforts by the Employee Benefits Security Administration (EBSA), an arm of the Labor Department, to update the definition of “fiduciary” that the department uses when dealing with retirement plan investment providers.
Fiduciaries have a legal obligation to put the interests of the plans and plan participants they serve ahead of their own
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Today, to be a fiduciary of a plan governed by the Employee Retirement Income Security Act (ERISA), a person must either have control or discretionary authority over plan investments, or the person must meet a 5-part test described in a 1975 regulation. The person must give advice on a regular basis, have some kind of agreement or arrangement with the plan or a plan fiduciary, and provide individualized advice.
The draft rule released by EBSA rule would expand the definition of plan fiduciary to include any person that provides investment advice to plans for a fee or other compensation.