Supovitz Makes the Case for Level Playing Field with Rollovers

By Andrew Remo • August 13, 2015 • 0 Comments
Marcy Supovitz, President-Elect of the American Retirement Association, testified at the public hearing on the Department of Labor’s reproposed fiduciary rule Aug. 12.

Supovitz' testimony concentrated on the American Retirement Association’s innovative proposal to create a separate, streamlined exemption in the final rule that would encourage plan advisers to work with participants on rollovers in connection with the workplace retirement plans they serve. (Click here to read her written testimony; a video of the panel in which she participated is posted online here.)

This proposed “level-to-level compensation exemption” is necessary because it isn’t clear that the Best Interest Contract Exemption (BICE) contained in DOL rule is available for rollover transactions generally. Even if it is assumed to be, the BICE as currently written would not be available for a rollover transaction in which a plan advisor receives more compensation by working with a plan participant who is moving to an IRA from a plan — even if that compensation is investment-agnostic on both sides of the transaction — because the BICE does not extend to discretionary investment management.

Earlier this month, a group of Democratic Senators on the Senate Finance Committee also asked that this disconnect in the rule be addressed so that it provides a level playing field for all advisers in the marketplace, regardless of whether they have a relationship to the plan and regardless of the fee structure they use.

Supovitz also took questions from DOL rulemakers on other aspects of her testimony, including the carve-out in the rule for platform providers. Joe Canary, Director of the EBSA Office of Regulations and Interpretations, asked if the American Retirement Association believed that the platform provider carve-out should be extended to IRAs. Supovitz responded that the platform provider carve-out should only apply to IRA platforms that meet specified conditions, such as an open architecture IRA platform, or an IRA platform that has no proprietary investments, or if the IRA platform is “blessed” by a third party fiduciary.

Supovitz also told DOL that the American Retirement Association recommends including intermediaries in the carve-out, including TPAs that recommend the involvement of a platform provider.

Impact on Small Businesses

In response to a question from Christopher Cosby, an attorney in EBSA’s Office of Policy and Research, about how the rule would affect the retirement plans of small businesses, Supovitz said it was critical the BICE be made available for small participant-directed DC plans. She explained that advisers encourage and assist small business owners to adopt plans, but that the current version of the rule creates roadblocks that impede advisers from serving this market because many advisers that service small plans are reliant on compensation models that would become unavailable under the proposed rule.

Supovitz also mentioned that the BICE’s significant contractual obligations and disclosure requirements are not necessary for ERISA-covered plans, since ERISA already contains these robust requirements and enforcement protocols.

What’s Next?

The four-day public hearing will end today, concluding a process that included 25 panels containing 75 presentations from a diverse group of stakeholders. (Our previous coverage of the hearings focused on Day 1 and Day 2.)


After the hearings conclude, the DOL will reopen the public comment period for additional comments. This additional comment is period is scheduled to last for 15 days after the transcript of the public hearing has been published (which could take some time due to the volume of testimony). Stay tuned as the DOL continues its inexorable march toward completion of the massive regulatory project.

Andrew Remo is the American Retirement Association’s Manager of Congressional Affairs.