Dol To Expand Erisa Fiduciary Definition

The US Department of Labor ( DOL ) has announced a proposed expansion of whom the agency would consider a fiduciary to include consultants that offer advice to retirement plans on proxy voting and the hiring of investment managers. In addition, brokes who make securities recommendations to retirement plans would be fiduciaries.

A key target of the rule is the thirdparty payments some investment consultants get when retirement plans hire money managers recommended by them.

The new rule would make the investmentrelated advice of consultants, brokers and others subject to all ERISA fiduciary obligations including prohibitions on selfdealing and other conflicts. DOL says an overhaul of the definition is needed because the current rule makes it too easy for entities offering investmentrelated advice to avoid a fiduciary obligation to the plan.

Under the current definition, the entity offering advice to the plan has to be doing so on a regular basis, subject to a mutual understanding that the advice will serve as a primary basis for investment decisions involving plan assets. The proposal would eliminate key existing exceptions, making clear that parties that offer investment advice to employee benefit plans for a fee or are registered with the SEC as investment advisers, and the advice may be considered in connection with making investment or management decisions with respect to plan assets could not avoid fiduciary responsibility.

DOL says plan representatives want impartial advice from consultants, appraisers and other advisers. If these advisers are not fiduciaries under ERISA, they may operate with conflicts of interest that they need not disclose to the plan fiduciaries who expect impartiality and often must rely on their expertise.