Graff: Impact of DOL Rule ‘Mammoth’

By ASPPA Net Staff • May 21, 2015 • 0 Comments
ASPPA Executive Director and CEO Brian Graff opened ASPPA’s first-ever virtual conference May 14 with a discussion of “the elephant in the room” — the Department of Labor’s (DOL) reproposal concerning the definition of who is a fiduciary.

Graff noted that the proposed regulation is “mammoth,” but not just in size — also in importance. “The breadth of this proposal is pretty significant. It can’t be understated,” he said.

“It’s not just changing the definition of the ‘fiduciary,’” Graff continued; among the many other provisions, he noted, are two new prohibited transaction exemptions — including the best interest contract exemption, which he called “the most significant.” He added that the proposal also includes an exemption for investment education, which he termed “very important” for those in the administrative and record keeping areas.

The proposal was a long time coming, Graff indicated. He noted that a five-part test under the current regulation that was put in place in 1975, but that there has been no change since then. “Obviously, our industry’s changed a great deal since then,” he said, adding “The Department of Labor’s been wanting to change this regulation for many years now.”

Graff said the DOL contended that 401(k)s did not even exist in 1975, and that the regulation needed to be updated — adding that there is a general view that that is true. But simple necessity is not all that matters, Graff indicated. “Of course, how they updated it is really what generated the controversy,” he said.

“It’s very broad in terms of who it captures and the effects that it has in terms of conversations that you’re having with participants,” Graff said of the proposal. “Really, this is a change to the definition of what constitutes investment advice under ERISA. If you’re considered to be giving investment advice, that means you’re a fiduciary under ERISA, which means you’re subject to the prohibited transaction exemption.”

Recordings of the virtual conference will be made available soon; look for more information concerning their availability in ASPPA Connect.

Opinions expressed are those of the speakers, and do not represent the official views of ASPPA.