FAQs on Fiduciary Rule Coming Soon, Says Borzi

By John Iekel • October 25, 2016 • 0 Comments
Much-anticipated guidance on the DOL fiduciary rule will be coming soon, according to Phyllis Borzi, head of the DOL’s Employee Benefits Security Administration (EBSA). She made the remarks Oct. 25 during the Government Update session at the ASPPA Annual Conference.

Borzi was joined by PBGC Director W. Thomas Reeder, Senior Advisor and Deputy Assistant Secretary of the Treasury Mark Iwry, and American Retirement Association CEO Brian Graff. 

Fiduciary Rule

Borzi told attendees that the DOL guidance would come in the form of frequently asked questions (FAQs) on the rule and that the first set “will be issued very soon.” The first set will address questions raised regarding the Best Interest Contract (BIC) exemption; the second, definitions; and the third, additional questions, including more related to the exemption. She said she hopes that all three sets of FAQs will be “out by the end of the year.” 

And that may not be all. Borzi said that, “for the first several years, we’ll be focused on compliance assistance.” She added that “over the long haul, we probably will have an audit program,” but not in the short term. 

Borzi added that the DOL “continues to have productive meetings regarding making the rule operational.” But when asked by Graff whether there was any chance of the DOL changing the timeline for implementation of the Fiduciary Rule, Borzi said that it was “unlikely” but that one “should never say ‘never.’”

Increasing Coverage

Borzi said that the DOL is working on the agency’s state retirement plan initiative regarding whether political subdivisions of states also could offer such plans. She told attendees that ERISA implications really don’t change when local jurisdictions are concerned. Borzi said that the DOL is “concerned about proliferation,” but that “unless and until Congress acts,” such initiatives will help address what she called “a serious coverage problem.”

Finding Lost Participants

Coming soon: an expansion of efforts to find terminated vested participants and distribute unclaimed benefits. 

This effort originated at the DOL’s Philadelphia regional office, which started a pilot program that focused on such participants. It discovered, said Borzi, “an alarmingly high number of them that have not claimed benefits.” She said that the office paid special attention to those age 70 and older, and found them through public sources of information. The effort, which she said recovered nearly $1 billion for participants, stood in contrast to those of many plans, which she said typically send a letter regarding unclaimed benefits but do not follow up. 

Borzi said that this effort will be spreading to other DOL offices, and that expanding it is “exactly what we have in mind.” To that end, she said, the DOL has asked the Philadelphia office for tips on how to set up such efforts.

She also suggested that retirement plan sponsors check their procedures regarding unclaimed benefits and how they find lost participants, and remarked that this is an instance in which self-auditing is a good thing. 

Tell Us More 

Many employers and plan administrator find the Form 5500 frustrating, so it may have come as a bit of a surprise that Borzi finds it frustrating, too. But hers is not the same as that of those that use it to provide information to the government about their plans — hers results from its limitations as a source of information for government users. 

“From a policymaker angle, the Form 5500 is a source of great frustration to me, that there is no comprehensive source of information,” said Borzi. She noted that not all plans are required to file the form, and that “there are serious gaps in the amount of research and fundamental information available.” Borzi said that the DOL is “trying to fix” that.

Incumbent on All of Us

“It’s incumbent on all of us to focus on the fact that people want retirement security,” Reeder told attendees, calling himself a “cheerleader for defined benefit plans.” He said that there is “lots of room for growth in the defined benefit system,” and also that “we have to maintain the defined benefit promises we have already made.” 

Reeder warned that “the multiemployer system is in great danger of becoming insolvent in the next nine years. Unless something is done by Congress, the PBGC will be unable to do anything for them in nine years.” He said that his agency doesn’t have the resources to maintain the guarantees and that “we remain pretty far from a solution any time soon.” 

But Reeder did have good news, saying that “the single-payer system is not in danger of running out of money anytime soon,” characterizing it as “alive and healthy.” 

Iwry expressed the view that the federal government is better positioned to put a plan in place than state governments and to make an increase in coverage work. 

Iwry added that Treasury hopes to issue guidance on lifetime income options “in the near future.” In addition, he said, Treasury hopes to respond to requests for clarification on outstanding issues concerning longevity annuities and also to issue guidance on risk transferability.

Lauds and Kudos

This year’s Annual Conference also is a celebration of ASPPA’s 50th anniversary, and the panelists all commented on the positive influence ASPPA has been, and is, regarding the operation, administration and governance of retirement plans. 

“You are respected for the balance that you bring,” said Iwry. Similarly, Borzi said, “One of the things that’s very important is to make sure there’s a balance,” and said that she and her agency rely on ASPPA and other organizations in maintaining that balance. 

And Reeder expressed his belief that ASPPA is one of the main reasons why the retirement system in the United States is one of the best in the world.