Phyllis Borzi, Assistant Secretary of Labor at the Employee Benefits Security Administration (EBSA), laid out on Monday EBSA’s regulatory agenda for the rest of the year and clarified one area that’s caused a “backlash” from retirement planning officials—the department’s position on the use of brokerage windows under fee disclosure rule 408(b)2.
While stating that she couldn’t predict the timing of EBSA’s release of its reproposed rule to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), Borzi restated comments she made to AdvisorOne in a recent interview that Labor will not be releasing a fiduciary rule that mirrors the one being crafted by the Securities and Exchange Commission (SEC). “I will not promise anybody there will be a single fiduciary standard,” Borzi told attendees at the Society of Professional Asset-Managers and Record Keepers (SPARK) Institute’s annual conference in Washington.
However, she added that compliance with EBSA’s fiduciary standard “won’t put you out of compliance with another [fiduciary] standard” such as the SEC’s.
Borzi also said the reproposed fiduciary rule will “make clear what types of investment counseling constitutes advice versus education,” and include a more “robust” economic analysis.
‘Backlash’ on Brokerage Windows
Borzi also noted the “backlash” that EBSA has received from the industry regarding its guidance on use of brokerage windows as part of EBSA’s fee disclosure rules 408(b)2 and 404a-5. The industry has complained that the department has ushered in a new requirement involving brokerage windows. But Borzi said during her comments that’s just not true.
The department, she said, has noticed an accelerating trend that has occurred due to rule 408(b)2: “There appears to be a notion that the best advice to give employers is if they want to avoid fiduciary duty they should provide an unlimited choice of investment options,” Borzi said. “People are advising [their plan sponsor] clients that the way to get around the 404c [participant] disclosure [rule] is to move to a brokerage window” that offers unlimited investment options.