The Department of Labor’s redraft of its fiduciary rule could be released by next April or May, said Brian Graff, executive director of the American Society of Pension Professionals and Actuaries as well as the National Association of Plan Advisors, on Tuesday.
At Charles Schwab’s IMPACT conference in Washington, Graff discussed what he said were the two biggest issues for retirement plan advisors to watch next year: the DOL’s fiduciary reproposal, and the trend of states “getting more involved with retirement issues,” which Graff said makes him “nervous.”
As Phyllis Borzi, assistant secretary of labor for DOL’s Employee Benefits Security Administration, said Oct. 29 at ASPPA’s annual conference, EBSA is coming “very close” to finishing its work on the reproposed rule.
Graff pointed to the problems he sees with the DOL’s fiduciary reproposal. If IRAs are included — Borzi has said they are — the DOL could run into enforcement difficulties. If the definition of fiduciary advice is the same for retirement plans and IRAs, the DOL “will not have the authority to enforce” the IRA portion, Graff said, as IRAs are under the jurisdiction of the Internal Revenue Service. The IRS, he said, has six employees devoted to IRAs.
“Here’s my concern with what Borzi is trying to do: It’s not so much the notion of a fiduciary standard … but if there’s no enforcement teeth, you could be creating a Wild West.”
A fiduciary standard’s “practical impact” on the marketplace will be “how do you get paid, and will certain forms of compensation no longer be allowed,” he said.
“It’s not so much that more people will be fiduciaries,” under the proposal, Graff said, “but how they will get paid.” From an enforcement standpoint, DOL will get at the fiduciary problem “by limiting forms of compensation.”
The potential limit on compensation will affect the small-business market, Graff said, in that if a small business “doesn’t have a [401(k)] savings plan, who’s going to sell them a plan if they won’t get paid?” The small-business problem “is a vexing problem in the context of getting paid under a fiduciary standard.”