In a recent communication to the Labor Department, Empower, a prominent retirement plan record-keeping firm, has formally requested the withdrawal of the department's latest proposal that seeks to revise the definition of an ERISA fiduciary.
Released on October 31, this proposal aims to modify the existing five-part test that determines when a financial professional is deemed an investment advice fiduciary under ERISA. The suggested alterations imply that even one-time advice instances, like rollovers or annuity purchases, would be classified as fiduciary actions if they satisfy other aspects of the test.
Empower's CEO, Edmund F. Murphy III, in a press release dated December 21, emphasized the necessity of retracting the proposed rule. He expressed concern that the rule, if implemented, would hinder the ability of providers to effectively communicate with employers. These communications are crucial for employers to make well-informed decisions regarding their retirement plans. Murphy argued that, contrary to simplifying plan formation, the proposed rule introduces additional obstacles.
The press release further detailed that the proposal might limit specific interactions, including sales discussions and investment conversations with plan sponsors.
Moreover, Empower has raised an issue with the proposal's similarity to the department's prior rule, which broadened the fiduciary definition but was eventually invalidated by the 5th U.S. Circuit Court of Appeals in New Orleans in 2018. Murphy, in a comment letter dated December 20, cautioned that finalizing this new rule could lead to significant implementation costs for the regulated community, especially considering the likelihood of the rule facing legal challenges similar to its predecessor.
Empower also noted potential issues with the proposal's impact on disclosure requirements. According to the firm, these changes might not be beneficial for either providers or individuals and are framed in a manner that renders them too ambiguous to be effectively actionable. During a public hearing on December 12, a spokesperson from the Securities Industry and Financial Markets Association echoed Empower's call for the withdrawal of the proposal, though opinions expressed at the hearing were diverse.
The deadline for submitting comments on the proposal is set for January 2.
