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Defining Who Is a Fiduciary Is Central to ERISA, Biden's DOL Pick Says

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What You Need to Know

  • As head of EBSA, Gomez would be the point-person on a rulemaking to update the definition of fiduciary.
  • Labor Secretary Marty Walsh said in mid-June that Labor plans to issue a new fiduciary rulemaking.
  • Biden nominated Gomez in late July to head EBSA.

Lisa Gomez, President Joe Biden’s pick to head the Labor Department’s Employee Benefits Security Administration, told senators Thursday that “there’s nothing that is more central to ERISA than defining who is a fiduciary.”

In comments during her confirmation hearing before the Senate Health, Education, Labor and Pensions Committee, Gomez — who will be central in helping Labor craft a new fiduciary rule — said that if confirmed, she looks forward to working with the Securities and Exchange Commission as well as with Labor “to be briefed on the efforts of looking at the definition of a fiduciary in different contexts, and taking another look at the conflict of interest rule and how it would apply in different situations.”

Gomez explained that under the Employee Retirement Income Security Act, there is a five-part test for determining whether an individual is a fiduciary. “Determining exactly who is a fiduciary in different contexts,” she said, “has been the source of disagreement and it’s been a long road to get there.”

If confirmed, Gomez would join EBSA as Labor works to issue a proposed rulemaking to update the definition of “fiduciary” under ERISA.

Phyllis Borzi, the former head of EBSA under the Obama administration, told ThinkAdvisor in a previous interview that she expects Labor to propose “for notice and comment an update of the five-part rule [on who’s a fiduciary] to formally incorporate the evolution of their thinking on several aspects of the five-part test that they discussed in the preamble to PTE 2020-02.”

Gomez added during the confirmation hearing: “The cornerstone of being a fiduciary is acting in the best interests of the participants and beneficiaries … I would commit to making sure to always work with fiduciaries to make sure they are acting in the best interest” of beneficiaries.

In late July, Biden nominated Gomez, a partner at Cowen Weiss and Simon in New York, to head EBSA.

Industry trade groups are urging the Labor Department to extend the Dec. 20 compliance date for its fiduciary advice rule. The Biden administration allowed the Trump administration’s fiduciary prohibited advice exemption, or PTE, to go into effect in mid-February.

The regulation, called “Improving Investment Advice for Worker & Retirees,” is “broadly aligned” with the SEC’s Regulation Best Interest, according to EBSA.

However, Labor Secretary Marty Walsh said in mid-June that Labor plans to issue a new proposed rulemaking to update the definition of “fiduciary” under the Employee Retirement Income Security Act. That proposal could come by December.