Release Date: October 21, 2010
US Labor Department proposes rule defining 'fiduciaries' of employee benefit plans
Washington – The U.S. Department of Labor's Employee Benefits Security Administration today announced a proposed rule to update the definition of "fiduciary" to more broadly define the term as a person who provides investment advice to plans for a fee or other compensation.
The department's proposed rule would amend a 1975 regulation that defines when a person providing investment advice becomes a fiduciary under the Employee Retirement Income Security Act. The proposed amendment would update that definition to take into account changes in the expectations of plan officials and participants who receive advice, as well as the practices of investment advice providers.
According to the proposal, the 1975 rule's approach to fiduciary status may inappropriately limit the department's ability to protect plans, participants and beneficiaries from conflicts of interest that may arise from today's diverse and complex fee practices in the retirement plan services market. The proposed rule is designed to remedy this limitation, and protect plan officials and participants who expect unbiased advice, by giving a broader and clearer understanding of when individuals providing such advice are subject to ERISA's fiduciary standards.
"The proposal will ensure that plans receive advice based on reliable information that protects the interests of plan participants and beneficiaries," said Phyllis C. Borzi, assistant secretary of labor for EBSA. "We believe that this proposal more closely reflects the statutory language of ERISA and the realities of the current investment marketplace, and therefore will ensure those who provide investment advice are held accountable as fiduciaries under the law."
The proposed regulation will be published in the Federal Register on Oct. 22, 2010. For a copy of the proposed regulation, visit http://www.dol.gov/ebsa.
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