Chamber Comments on DOL's Fiduciary Definition Regulation

Final DOL Fiduciary Definition Comment Letter 1 2

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Chantel Sheaks
Vice President, Retirement Policy, U.S. Chamber of Commerce

Published

January 02, 2024

January 2, 2024

Office of Regulations and Interpretations, Room N5655
Office of Exemption Determinations
Occupational Safety and Health Administration
U.S. Department of Labor
Washington, DC 20210

RE: Retirement Security Rule: Definition of an Investment Advice Fiduciary (RIN 1210–AC02), Proposed Amendment to Prohibited Transaction Exemption 2020–02 (ZRIN 1210–ZA32), Proposed Amendment to Prohibited Transaction Exemption 84–24 (ZRIN 1210–ZA33)

To Whom It May Concern:

The U.S. Chamber of Commerce (Chamber) submits these comments on the Department of Labor’s (DOL) Retirement Security Rule: Definition of an Investment Advice Fiduciary (Proposed Regulation), Proposed Amendment to Prohibited Transaction Exemption 2020–02 (Proposed Amendments to PTE 2020-02), and Proposed Amendment to Prohibited Transaction Exemption 84–24 (Proposed Amendments to 84-24).[1] As a fundamental matter, the Chamber believes an entity or person giving investment advice for a fee should do so under a heightened standard of care. However, the regulation of investment advice must be with the appropriate regulator overseeing such advice and each regulator applying the law as directed by Congress. We believe some aspects of the Proposed Regulation and the Amended PTEs are not within DOL’s powers.

As discussed in more detail below, the Chamber requests DOL reconsider its approach to the Proposed Regulation and the Amended PTEs for the following reasons:

General

The Proposed Regulation and Amended PTEs are overly broad and outside of DOL’s statutory authority by imposing Title I obligations on entities only subject to Title II.
The Proposed Regulation and Amended PTEs are integral to each other and not severable.
DOL’s interpretation that there is no difference between sales and advice is contrary to what the Fifth Circuit has said and to the longstanding interpretation of the Employee Retirement Income Security Act (ERISA).

Proposed Amendment

The standard in paragraph (c)(1)(i) of the Proposed Regulation is overly broad by including assets that are not covered by either ERISA or the Internal Revenue Code (Code).
The standard in paragraph (c)(1)(ii) of the Proposed Regulation fails to meet the Fifth Circuit’s “relationship of trust and confidence” standard.
The term “recommendation” is the basis for determining fiduciary status, but it is not defined.
A 60-day effective date is unreasonable.
DOL grossly underestimates the costs of the Proposed Regulation and Amended PTEs.

Proposed Amendments to PTE 2020-02

PTE 2020-02 should not have been amended only 15 months after its final enforceability date.
DOL has not shown that the Proposed Amendments to PTEs 2020-02 and 84-24 meet the requirements of ERISA 408(a) or Code section 4975(c)(2).
The Proposed Amendments to PTE 2020-02 create a private right of action against Title II Financial Institutions and Investment Professionals which the Fifth Circuit explicitly stated DOL does not have the authority to do.
The requirement in the Proposed Amendments to PTE 2020-02 that Financial Institutions and Investment Professionals provide a blanket statement, without exception, that they are acting in a fiduciary capacity contradicts ERISA’s functional fiduciary test.
The requirement to provide costs, fees and compensation relating to conflicts is of little utility to a retirement investor and likely is not possible outside of a fee for service transactions.
The standard articulated in Section II(b)(3) of the Proposed Amendments to PTE 2020-02 is contrary to ERISA’s disclosure standards.
DOL should not require Financial Institutions to maintain additional web disclosures.
DOL’s limitation on compensation is at direct odds with Reg BI and provides an unworkable model for the brokerage industry.
DOL’s mandated inclusion of filing the Form 5330 as part of the retrospective review is beyond its regulatory authority and eliminates the self-correct program.
Section III(a)(1) and (2) of the Proposed Amendments to PTE 2020-02 should be deleted and DOL should keep the current standard.
Access to compliance records should be limited only to DOL and Treasury.

Proposed Amendments to PTE 84-24

Any changes to PTE 84-24 should have been a separate rule making.
The Proposed Amendments to PTE 84-24 inappropriately regulate insurance.
The disclosures required under the Proposed Amendments to PTE 84-24 impermissibly create a private right of action against independent producers.
Disclosure of every insurance product available for recommendation would be burdensome, provide little value to the retirement investor, and be subject to frequent change.
Any statement provided before the final recommendation of an annuity regarding the amount of the insurance commission to be paid in connection with the recommendation will be misleading.
It is unclear how an independent producer is to compare fees and expenses of employer plans without an annuity option with a recommended annuity.
The policies and procedures in the Proposed Amendments to 84-24 are fundamentally unworkable and are contrary to most state laws.
An entity that is not a disqualified person who does not take part in a prohibited transaction is not liable for the excise tax.
DOL should not incorporate into PTE 84-24 the Proposed Amendments to PTE 2020-02 relating to ineligibility based on a litany of crimes.
Access to compliance records should be limited only to DOL and Treasury.
ERISA civil penalties and excise taxes cannot be imposed on insurers.

Read the full letter: