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Examining the New Income Measures in the Census Bureau's Current Population Survey
"Compared with the estimated amount of income under the traditional income questions for 2013, the redesigned questions resulted in an estimated total annual income 9.1 percent larger for those ages 65 or older, an aggregate amount of almost an additional $133 billion. Furthermore, annual retirement income was 27.9 percent larger, an aggregate difference of almost $71 billion annually. Income from IRAs and 401(k)-type plans was an important component of this higher amount of annual retirement income found in the new questions, which overall was more than 250 percent higher than that found by the traditional measure." (Employee Benefit Research Institute [EBRI])
IRA Balances, Contributions and Rollovers, 2013 (PDF)
36 pages. "The average account balance decreased from $91,864 in 2010 to $87,668 in 2011 before increasing to $119,804 in 2013 -- an increase of 30.4 percent from 2010 to 2013, and 14.1 percent from 2012 to 2013.... The percentage of individuals who contributed to their IRA was relatively consistent ranging from 12.1 percent in 2010 to 13.8 percent in 2013.... The percentage of contributors who contributed the maximum rose from 43.5 percent in 2010 to 53.5 percent in 2012.... When examining the same individuals that were in the database each year from 2010 to 2013, the median percentage change in these individuals' account balances was a 33.6 percent increase." (Employee Benefit Research Institute [EBRI])
[Guidance Overview] Analysis of the DOL Fiduciary Proposal's Impact on Independent Registered Investment Advisers
"A recommendation to a participant to take a distribution, and advice regarding the investment of assets to be rolled over to an IRA, are fiduciary investment advice under the proposed regulation. This is in contrast to existing guidance in DOL Advisory Opinion 2005-23A ... In other words, the proposal applies to a recommendation, regardless of whether the adviser already is a fiduciary to the plan and regardless of whether the adviser is otherwise providing services to the plan or participant.... For an RIA who is not already serving as a fiduciary to a plan, the proposal could be significant." (Drinker Biddle)
Missouri Rep. Ann Wagner Wages 'War' Against DOL Fiduciary
"A leading opponent of a Department of Labor proposal to raise investment-advice standards for brokers working with retirement accounts is pursuing an aggressive strategy -- that includes denying the agency funds to implement it -- to stop the rule.... Ms. Wagner argues that the rule would significantly raise regulatory and liability costs for brokers and price them out of serving the middle-income market of retirement savers." (Investment News)
[Opinion] New Fiduciary Regs Proposal, Part 3: People Are Talking (PDF)
"When all is said and done, the average person must judge his or her personal and retirement plan investments using tools that they can handle. The rules and disclosures of the Proposal are just too complex to do participants or plan fiduciaries any good. Of course, we all know that there are bad actors out there, and yes, we need to get them out of the business, but there has to be an easier, more effective way." (Ferenczy Benefits Law Center LLP)
[Opinion] U.S. Chamber of Commerce Comment Letter to EBSA on Proposed Information Collection Requests and Burden Estimates Associated with the DOL Conflict of Interest Proposed Rule and PTE Notices (PDF)
10 pages. "The potential magnitude of these burdens raises serious concern that the costs of the proposed regulation's information collection strategy may outweigh the benefits that the proposed regulation is likely to achieve. Rather than proceeding down a too-costly regulatory path, the government should consider more carefully whether there may exist prudent alternatives to achieve the desired protections and benefits." (U.S. Chamber of Commerce)
[Guidance Overview] DOL's Proposal to Expand Fiduciary Definition Would Bring Many Service Providers Into Scope
10 pages. "The reproposed definition of 'fiduciary' is intended to expand the scope of activities that will result in fiduciary status and application of the prohibited transaction rules, particularly covering many services that broker-dealers and other financial advisers provide to plans, plan participants, and Individual Retirement Account (IRA) owners. The DOL has provided exceptions for certain activities that, in its view, should not result in fiduciary status. The reproposal leaves ope n questions about what types of investment-related activities or communications may still be viewed as nonfiduciary even though they do not fall within one of the six carve-outs." (Morgan Lewis)
[Guidance Overview] The Impact of the DOL's Fiduciary Proposal on Independent Registered Investment Advisers
"The [Best Interest Contract Exemption (BICE)] conditions are so difficult to satisfy in the context of distribution recommendations that [the authors] believe most RIAs will provide distribution education, rather than recommendations.... If the RIA is providing advice at the plan level but not to participants, this may be impractical. But for RIAs that are providing advice to participants, they could avoid engaging in a prohibited transaction by maintaining the same fee in the IRA as they charged in the plan." (Bruce Ashton and Fred Reish, of Drinker Biddle)
[Guidance Overview] DOL Reproposed Rules Governing the Definition of 'Fiduciary,' Part 2: The 'Best Interest Contract' Exemption
"[The Best Interest Contract (BIC)] exemption does not apply to advisers who advise on the selection on a menu of investment options.... The exemption exposes advisers and financial institutions to class action claims based on required warranties, which may involve an unacceptable level of risk.... The BIC exemption does not bar arbitration provisions as potential plaintiffs might have hoped, but it does ensure access to the courts for class actions. In the case of ERISA-covered retirement plans, this will likely mean access to federal court with limits on remedies.... The adviser must acknowledge, and will be subject to, fiduciary status. Accordingly, the adviser will be subject to ERISA-like standards, but remedies will not be limited in the case of IRAs." (Mintz Levin)
[Guidance Overview] Top Points from the DOL Proposal to Expand the Definition of Fiduciary
"[A]dvice does not have to be provided on a regular basis to result in fiduciary status. Thus, one-time contacts with a plan or IRA may result in fiduciary status.... The most restrictive provision of the best interest contract exemption is the definition of the 'assets' that qualify for the exemption.... Excluded from this definition is any equity security that is a security future or a put, call, straddle or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so." (DLA Piper)
[Guidance Overview] DOL Re-Proposed Definition of 'Fiduciary,' Part 1: The Rule and Its Exceptions
"In one camp are those who would impose an impossibly high fiduciary standard on the financial services industry without regard to the consequences to plan participants and investors; there are others who think the status quo is fine, despite transformative changes in the retirement investing environment over the past 40 years. [The authors] believe that there is a middle ground between the competing constituencies, and that the proposed regulations strike an appropriate conceptual balance of completing interests. However, [they] also believe that the proposal, as currently drafted, falls short in some important, practical respects. This post explains the proposed regulations and the context in which they arise." (Mintz Levin)
[Guidance Overview] Proposed Fiduciary Definition Would Impact Investment Adviser Practices
"The broader definition of investment advice fiduciaries, combined with the exclusion of communications to IRA owners from the carve-outs for seller transactions, platform providers and selection and monitoring assistance, would sweep more relationships with IRA owners into exposure to prohibited transaction excise taxes. The proposed amendments to current prohibited transaction exemptions would drive advisers to IRA owners toward reliance on the new proposed Best Interest Contract Exemption, which makes investment advisers agree to the same fiduciary standards as apply under ERISA and gives IRA owners enforceable rights ... Thus, under the proposed DOL scheme, what is not required by statute will be imposed by contract." (Faegre Baker Daniels LLP)
Age 70-1/2? Think Through Your RMD Choices
"The person who thinks that postponing is always a good idea because you defer the taxes a little longer should remember that postponing actually increases the amount of the second year's RMD -- because the age 70-1/2 year RMD that you did not take in the age 70-1/2 year is still part of the account balance at the end of the year! ... If the first year's RMD is postponed, two RMDs are required in the second year, and the two RMDs in the second year will have different deadlines, be based on different account balances, and use different divisors!" (Natalie Choate, via Morningstar Advisor)
[Opinion] What Retirement Savers Need to Know About the Fiduciary Rule
"According to the Labor Department: 'As baby boomers retire, they are increasingly moving money from ERISA-covered plans, where their employer has both the incentive and the fiduciary duty to facilitate sound investment choices, to IRAs (which are mentioned no less than 65 times in the Labor Department's proposed rule) where both good and bad investment choices are myriad and advice that is conflicted is commonplace.' And because of that, the Labor Department wants those providing 'investment advice' to IRA account owners to be 'fiduciaries' as well. And because of that, critics say IRA account owners, especially those with small accounts, will either get less advice or pay more for it if the proposed rule goes into effect as proposed." (MarketWatch)
[Opinion] What Retirement Savers Need to Know About the Fiduciary Rule
"According to the Labor Department: 'As baby boomers retire, they are increasingly moving money from ERISA-covered plans, where their employer has both the incentive and the fiduciary duty to facilitate sound investment choices, to IRAs (which are mentioned no less than 65 times in the Labor Department's proposed rule) where both good and bad investment choices are myriad and advice that is conflicted is commonplace.' And because of that, the Labor Department wants those providing 'investment advice' to IRA account owners to be 'fiduciaries' as well. And because of that, critics say IRA account owners, especially those with small accounts, will either get less advice or pay more for it if the proposed rule goes into effect as proposed." (MarketWatch)
[Opinion] What Retirement Savers Need to Know About the Fiduciary Rule
"According to the Labor Department: 'As baby boomers retire, they are increasingly moving money from ERISA-covered plans, where their employer has both the incentive and the fiduciary duty to facilitate sound investment choices, to IRAs (which are mentioned no less than 65 times in the Labor Department's proposed rule) where both good and bad investment choices are myriad and advice that is conflicted is commonplace.' And because of that, the Labor Department wants those providing 'investment advice' to IRA account owners to be 'fiduciaries' as well. And because of that, critics say IRA account owners, especially those with small accounts, will either get less advice or pay more for it if the proposed rule goes into effect as proposed." (MarketWatch)
[Opinion] The Hidden Provision in the DOL's Proposed Fiduciary Rule
"The DOL believes advisors who recommend portfolios consisting of low-management-fee index funds, passively managed funds or exchange-traded funds presumptively could be deemed to be acting in a manner consistent with their fiduciary obligation, since these investment options 'present minimal risk of abuse.' The DOL justifies this position by noting it is 'consistent with the prevailing (though by no means universal) view in the academic literature that posits that the optimal investment strategy is often to buy and hold a diversified portfolio of assets calibrated to track the overall performance of financial markets.' " (U.S. News & World Report)
[Opinion] It's Time to Raise IRA Contribution Limits
"One straightforward solution would be to adopt a uniform annual maximum contribution to tax-advantaged retirement plans. From the perspective of the government, it is more important that people save an adequate amount for retirement, rather than that they save in a particular type of tax-favored vehicle." (Morningstar)
Investor Confusion About Fiduciary Duty Not Likely to Be Resolved by Proposed DOL Rule
"Investors remain confused about whether their financial advisers are fiduciaries and about the fees they pay for advice ... [A new report] shows that more than four out of five investors believe that their adviser is a fiduciary or acts in their best interests. Yet most investors use a full service broker -- who must sell investments that are suitable for their clients but not necessarily the lowest cost or commission -- and a much smaller percentage use investment advisers, who already must meet the best-interests standard." (Investment News)
For Advisors: The Essence of the Fiduciary Proposal
"[A]lmost every person who makes an investment recommendation to a plan, a participant or an IRA owner will be considered a fiduciary. For 'pure' level-fee advisors (which are typically RIAs), there won't be any change for their services to plans, participants or IRAs -- with one exception. The exception is 'capturing' rollovers." (
Five Fast Facts Regarding the New DOL Proposed Fiduciary Rule
"[1] There appears to be no need to take any immediate action ... [2] It appears that the proposed rule will NOT affect non-ERISA plans ... [3] Conversely, IRAs appear to be significantly affected by the rules ... [4] The proposed rule primarily affects service providers as opposed to plan sponsors ... [5] There are a lot of unknowns, at least at present." (Cammack Retirement Group)
[Guidance Overview] DOL's New Proposed Fiduciary Definition: Start Preparing Now
"This alert is not intended to fully explain the extensive Proposal, but instead it suggests what an employer, pension consultant, insurance salesman or investment advisor should consider doing now to prepare for the date the final regulations and prohibited transaction exemptions are issued.... The Proposal is not minor and will require many changes in operations of many parties dealing with retirement plans and IRAs. While the DOL has indicated there will be 8 months following the effective date (which will be 60 days post issuance of the final regulation) in which to bring your plan or entity into compliance, even this almost 10 month period may not be sufficient to accomplish full compliance for all regulated parties. In addition, each party's compliance will depends on the compliance of the other parties with which it interacts." (Winstead PC)
[Guidance Overview] The Likely Impact on Investment Advisors of the Proposed Fiduciary Regulation
"[T]he DOL has adopted the FINRA position that a recommendation to a participant to take a distribution from a plan is a recommendation to sell the investments in the participant's account. Thus, a recommendation to take a distribution is fiduciary advice, implicating both the fiduciary standard of care and prohibited transaction rules. As a result, fiduciary advisors will need to prudently analyze the participant's best interests, considering factors such as services and fees in both the plan and an IRA. There may be cases where a fiduciary advisor would need to recommend that the participant stay in the plan (where, e.g., the advantages of the plan outweigh the advantages of an IRA).... While the prohibited transaction relief in [the 'best interest contract exemption] also applies to recommendations to take distributions and rollover to an IRA, it will be difficult to satisfy the conditions." (Fred Reish, for Hartford Funds)
[Guidance Overview] DOL Proposes Expanded Definition of Fiduciary
"One area that plan sponsors will need to review is investment education which is provided to participants, ensure that the materials used and topics covered do not go beyond that which is permitted under the regulations, thus inadvertently making an 'educator' a fiduciary. The greater impact of the 2015 Proposal will fall on those persons (e.g., broker-dealers) who provide direct investment advisory services to plan participants and IRA holders; or who try to market to participants who are considering taking distributions from plans and rolling over these distributions to IRAs." (Seyfarth Shaw LLP)
[Guidance Overview] The DOL's Re-proposed Redefinition of Fiduciary (PDF)
26 pages. "The 250-page 'Regulatory Impact Analysis' that accompanies the proposal argues that the current definition of 'fiduciary,' promulgated in 1975, has left the door open to pervasive conflicts of interest that cost plans, plan participants and IRA owners billions of dollars a year, as a result of excessive fees and unsuitable investment choices. This [article] will discuss ... exactly what the proposal says and what it may mean to broker-dealers, insurance companies and other parties that market investments to ERISA-covered retirement plans, welfare plans and individual retirement accounts ... [and] the new proposed prohibited transaction class exemptions and the proposed amendments to existing class exemptions." (Steptoe & Johnson LLP)
Roth: Breaking Down the Buzzword in Defined Contribution Plans (PDF)
5 pages. "Many participants (and even plan sponsors) are also not aware of some of the unique similarities and differences between Roth when offered in a Defined Contribution Plan versus an Individual Retirement Account (IRA). Our objective is to provide a general overview of Roth, its role and appeal within Defined Contribution Plans, and finally, key considerations for plan sponsors in evaluating this feature in an educated and informed manner." (Portfolio Evaluations, Inc.)
[Guidance Overview] Newly Proposed DOL Fiduciary Rule: Moving to a Universal Fiduciary Standard
33-slide Powerpoint presentation. Topics include: [1] Background on existing rule; [2] Proposed fiduciary definition; [3] Carve-outs from definition; [4] Proposed best interest contract exemption; [5] Other proposed exemptive relief; and [6] Timeline for rulemaking. (The Wagner Law Group)
Four Steps to Taking a Roth Conversion After Age 70-1/2
"It is crucial that you take the RMD before doing the Roth conversion. Missing that step means that you end up with an excess contribution, in the amount of the RMD, rolled over to the Roth IRA. The excess contribution is subject to a penalty of 6% per year for every year that it remains in the Roth IRA." (Slott Report)
[Opinion] Five Ways the DOL Could Improve Its Fiduciary Proposal
"[1] Start by clarifying and narrowing the activities which result in fiduciary status.... [2] Provide a clear carve-out for the actuaries, lawyers and accountants who perform typical professional services in connection with investments.... [3] Provide a carve-out for sophisticated IRA investors similar to the carve-out for large plan investors with financial expertise.... [4] Eliminate the 'catch 22' for acknowledging fiduciary status.... [5] Fix the 'Best Interest' exemption." (Osler, Hoskin & Harcourt LLP)
More Than One Million People Increase Retirement Savings Rate; Account Balances Reach Record High
"The average 401(k) balance at the end of Q1 was $91,800 ... up 0.5 percent from last quarter and up 3.6 percent from one year ago. More than a million workers increased their contribution rate in Q1 2015, and a record 23 percent of employees have increased their contribution rates since Q1 2014. The average overall savings rate, which includes both employee and employer contributions, increased to 12.5 percent. The employee contribution rate remained constant at 8.1 percent while the employer contribution rate climbed to 4.4 percent.... For self-employed 401(k) accounts, the average balance at the end of 2014 was $144,100, a 39 percent increase since 2007. The average contribution was $22,400 at the end of 2014, a 29 percent increase since 2007." (Fidelity)
[Guidance Overview] DOL Proposes New Fiduciary Regulation and Prohibited Transaction Exemption Relief for Investment Advice Fiduciaries (PDF)
10 pages. "The Proposed Regulation, if adopted, is expected to extend fiduciary status to many investment professionals, including broker-dealers, insurance agents, pension consultants and appraisal firms, that do not consider themselves to be fiduciaries under current law.... Unlike the current regulations, the Proposed Regulation does not require that investment advice be furnished on a regular basis, or that the adviser and advice recipient mutually agree that the advice furnished will serve as a primary basis for investment decisions." [Article includes a 2-page chart summarizing the proposed amendments to existing prohibited transaction class exemptions.] (Skadden, Arps, Slate, Meagher & Flom LLP)
A Small But Important Change Proposed for Retirement Savings Rules
"The Obama proposal, which was buried in last February's budget, would exempt those with $100,000 or less in traditional retirement plans from having to make minimum required taxable withdrawals at all. Of course, they always could take out funds if they needed to (and would owe tax on the distribution) but they would not have to.... The idea is a very nice follow-up to rules Treasury adopted a year ago that would allow retirees to avoid the MRD tax on up to $125,000 of retirement savings they convert into longevity annuities." (Forbes)
[Guidance Overview] DOL Proposal Significantly Expands Fiduciary Adviser Rule
"[P]roviding advice regarding distribution planning ... would be a fiduciary act under this proposal.... The increase in the number of advisers who would be considered fiduciaries, as well as the increase in the types of services considered fiduciary acts, would significantly expand the plan sponsor's responsibilities for reviewing and monitoring outside providers. Likewise, plan sponsors would have additional responsibilities associated with reviewing and negotiating agreements with advisers to ensure they comply with general ERISA requirements and any prohibited transaction exemptions the advisers intend to use." (Calfee, Halter & Griswold LLP)
[Guidance Overview] Once More Unto the Breach: The New 'Fiduciary' Definition
"The Proposed Regulations would not require that advice be individualized to the needs of the plan, participant, or IRA owner. If the advice merely is 'specifically directed to' the participant or IRA owner, that would be sufficient to cause it to be fiduciary advice.... [T]he Preamble to the Proposed Regulations states that ... lawyers, accountants, and actuaries would not be treated as fiduciaries merely because they provide such professional assistance in connection with a particular investment transaction. Despite the Preamble statement, however, the actual language of the proposal is not clear on this point, and there is no express carve-out for such professional services.... In a departure from existing law that has been in effect since 1996, the carve-out for 'investment education' would not permit the use of asset allocation models that refer to specific investment products available under the plan or IRA." (Jones Day)
DOL Not Budging on Fiduciary Rule Comment Period
"Labor Secretary Thomas Perez indicated Thursday that his department will not extend further the 75-day comment period for its redraft to amend the definition of fiduciary under [ERISA]. When asked ... if DOL would honor the Tuesday request by industry trade groups to extend the comment period another 45 days, Perez reiterated DOL's previously stated comment guidelines." (ThinkAdvisor)
[Guidance Overview] DOL's Re-Proposed Fiduciary Definition Widely Prohibits Personalized Investment Assistance Even If the Assistance Is in Customer's Best Interest
7 pages. "The framework set up by the DOL could work conceptually, but in its current form, it would have the same effects as the original 2010 proposal -- cutting off the option for low and middle-income individuals and small businesses to receive personalized investment assistance.... The re-proposal [includes] an exemption from the prohibited transaction rules that could, if it worked correctly, preserve access to investment assistance. But the exemption does not work: it is extremely narrow, is not principle-based, and includes such impractical conditions that it is unusable." (Davis & Harman LLP)
[Guidance Overview] The New Fiduciary Regulation Proposal, Part I: All It Was Cracked Up to Be? (PDF)
"The DOL refers to the participants, beneficiaries, and IRA holders who will continue to receive conflicted advice under the Proposal as 'the investors [that] are particularly vulnerable to abuse.' The DOL also notes in the preamble to the Proposal that these consumers of advice services 'often do not read the legal documents.' Yet, the proposed exemption would leave these individuals to depend most substantially on the first two mechanisms to protect them: disclosure (which the DOL says they will not read) and integrity (which the DOL clearly believes investment advisors do not have ... at least, not in large enough measure).... The big difference is the ability of the DOL to get involved[.]" (Ferenczy Benefits Law Center LLP)
Execs See Fiduciary Proposal as Complicated, Costly
"Early assessments of the Department of Labor's fiduciary proposal find the new rules will be complicated to implement and costly for the industry, according to wealth management executives.... [A]nalysts at investment banking firm Keefe, Bruyette & Woods ... estimated that the DOL's proposal could be a 2% drag on Morgan's earnings, which the authors described as modest. For Raymond James, the analysts estimated 'roughly $2,400-$4,800 in increased compliance and litigation cost per advisor which equates to roughly $15 million to $30 million of incremental expenses.' " (On Wall Street)
Why Labor Department Gets a Say on IRA Advice
"Why does Labor's rulemaking extend to IRAs? That dates back to a 1978 agreement between the Labor and Treasury departments that is sometimes referred to as the 'peace treaty,' says Norman Stein, a law professor at Drexel University.... Under that division of labor, the Labor Department defines when advisers to retirement plans and to retirement savers are 'fiduciaries' who must put clients' interests first.... The proposal ... says IRAs and workplace plans should have similar protections, given that both benefit from tax incentives to encourage retirement security. In that way, IRAs are more like workplace plans than other investment accounts, the Labor Department proposal says." (The Wall Street Journal; subscription may be required)
[Guidance Overview] DOL Proposes Sweeping Expansion of Fiduciary Duty Rules
"The DOL mentioned and solicited advice with regard to, but did not formally propose, a 'streamlined' exemption which would allow advisers to receive compensation in connection with a plan's or IRA's purchase of certain high-quality, low-fee investment options, which might include mutual funds which are index funds or certain target date funds." (Ropes & Gray LLP)
Seven Ways You Can Mess Up Your Required Minimum Distribution
"[1] Using the wrong table to determine your life expectancy factor.... [2] Taking your RMD from the wrong type of account.... [3] Failing to adjust your prior year-end balance for an outstanding rollover or transfer.... [4] Failing to adjust your prior year-end balance for a recharacterization of a Roth IRA conversion made in the year after conversion.... [5] Taking your RMD from your spouse's retirement account.... [6] Forgetting to take your RMD altogether.... [7] Failing to timely correct any mistakes you uncover." (Slott Report)
Asset Location for Stocks in a Brokerage Account Versus IRA Depends on Time Horizon
"[W]hile the traditional 'rule of thumb' for asset location is that tax-inefficient bonds go into an IRA, while equities eligible for preferential tax rates go into a brokerage account, the reality is that for investors with long time horizons the optimal solution may be the opposite. Once stock dividends and portfolio turnover are considered, the ongoing 'tax drag' of the portfolio can be so damaging to long-term returns that placing equities into an IRA may be more efficient, even though they are ultimately taxed at higher rates! ... [In] the end, good asset location decisions depend not only on returns and tax efficiency, but an investor's time horizon as well!" (Michael Kitces in Nerd's Eye View)
[Opinion] Watered-Down Fiduciary Rule May Be the Best Case Scenario for Investors
"While a clean fiduciary standard offers brokers and insurance agents a straight-forward path for delivering conflict-free investment plan advice, a 'best interest contract exemption' makes that path fuzzy and subject to attack in court. That may not be a bad thing.... [R]etirement plan lawsuits, brought by lawyers like Jerry Schlichter, have been more successful in driving down excessive 401k fees than DOL fee disclosure regulations. Maybe a fuzzy fiduciary standard will fuel more suits that drive the cost of advice lower than a clean fiduciary standard would?" (Employee Fiduciary)
[Guidance Overview] DOL Fiduciary Rule Includes Carve-Out for Investment Education (PDF)
5 pages. "[It] appears possible to avoid fiduciary status when providing participants with [1] the list of plan options, and [2] tools for identifying the type and amount of assets that should achieve desired goals, respectively -- but not when furnishing these two types of material in tandem. The need to separate this information may reduce its value to participants." (Buck Consultants at Xerox)
[Guidance Overview] Details of DOL's New Proposed Rules Defining Fiduciary Investment Advice
"[T]he proposal does not require a meeting of the minds as to the extent to which the recipient will actually rely on the advice, but the parties must agree or understand that the advice is individualized or specifically directed to the particular advice recipient for consideration in making investment decisions.... [T]here is no requirement that the advice be specific to the needs of the plan, participant or beneficiary or IRA owner; rather, the advice only needs to be specifically directed to such recipient.... By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer's ERISA Practice Center)
[Guidance Overview] Limited Relief Provided by Carve-Outs and Exemptions in DOL's New Conflict of Interest Proposal
"The breadth of the general definition makes it vital to come within the terms of a carve-out if one is available. However, the carve-outs are not available to a person who admits to being an ERISA fiduciary.... [E]ven for advisers and financial institutions that undertake the many compliance duties and disclosures necessary to come within the 'best interest contract' exemption, in the end, the exemption only exempts the person from the prohibited transaction rules, including potential excise taxes for IRAs under the Internal Revenue Code.... [T]he exemption does not exempt a person... from the general fiduciary duties under ERISA ... or from potential civil liability to make up any loss to the plan resulting from a breach of those duties." (Dentons)
[Guidance Overview] DOL Reproposes Expanded ERISA Fiduciary Definition and Revised Complex of Exemptions
"DOL made a legitimate effort, from its frame of reference, to address a number of criticisms of the earlier proposal made formally during the 2010-2011 rulemaking process and informally during the intervening years.... On balance, however, there is substantial reason to question both the justification for and the execution of the reproposal. At bottom, the reproposal does not target 'bad actors' for reform. Instead, it would materially modify otherwise permissible practices in the affected industries and impose substantial compliance costs, uncertainties and exposure on 'good actors.' Consequently, important interests of plan sponsors, participants, IRA owners, financial services providers and the retirement system as a whole are in play." (Sutherland Asbill & Brennan LLP)
[Guidance Overview] DOL Proposes New Rules Defining Fiduciary Investment Advice
"The 'best interest' standard of the exemption is particularly important for IRA owners. Fiduciaries to ERISA-covered plans are already subject to duties of prudence and loyalty, but IRA fiduciaries are not subject to similar standards under the Code. By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer Rose LLP)
[Opinion] Why Exactly DOL's Latest Action Is So Shocking to So Many Brokers
"[M]illions of investors, holding a combined $7 trillion of individual retirement account assets, will be empowered for the first time to file class actions against advisors and their broker-dealers whom they believe have failed to put their interests first.... The financial services industry has been anticipating stiff 401(k) rules for years. Even so, the 120-page proposed rule was a shocker, carrying an IRA bombshell and a brand new 'best interest standard' for brokers.... For an industry accustomed to muddy rules and a focus on funneling the fury of ERISA toward 401(k) plans, not IRAs, the long-awaited proposal seems harsh, unforgiving and out of left field, according to broker-dealers and advocacy groups." (RIABiz)
[Opinion] Memo to Industry: Get Behind Fiduciary Rule
"Leaving aside the overblown rhetoric -- really, all American savers, including people with a deposit account in a bank, will suffer if brokers adhere a fiduciary standard?--the critics of a fiduciary rule have a point. There are some protections for investors who receive poor broker-provided advice on their retirement accounts. And smart people can poke some holes in the Administration's economic arguments in favor of the fiduciary rule.... [T]he issue comes down to the harm that can and does come to individual retirement investors in the absence of the fiduciary rule." (Morningstar)
[Guidance Overview] DOL's Expansion of the Definition of Investment Advice (or 'Fiduciary')
"The DOL's position is that the suitability standard is not sufficient to prevent the rendering of conflicted advice that it believes costs retirees billions of dollars in inappropriate fees. The brokerage industry contends, in part, that the cost of compliance with the new rule, the enhanced risk of litigation, and the fact that fees must necessarily be higher to provide advice on an individual basis make the rule unworkable and that small plans and small investors will lose the ability to obtain investment advice and to continue to work with a trusted advisor. At a minimum, compliance with the new rule is expected to alter the way that brokerage houses do business." (Benefits Bryan Cave)
[Guidance Overview] 2015 Proposed Revisions to Existing Prohibited Transaction Exemptions (PDF)
7-page chart details the current prohibited transaction exemption and proposed changes, and provides commentary. A more detailed summary and analysis of each PTE is also available: [1] Best Interest Contract Exemption (11 pages); [2] Pre-Existing Transaction Exemption (2 pages); [3] Insurance and Annuity Exemption (2 pages); [4] Principal Transactions in Debt Securities Exemption (5 pages). (Groom Law Group)
DOL's Fiduciary Advice Definition Proposal: The Regulatory Impact Analysis (PDF)
"Section 7 of the RIA discusses the regulatory alternatives that the DOL considered before settling on the 2015 Proposed Regulation. Although it appears that DOL considered a number of alternatives, some appearing more credible than others, DOL concluded that that none would protect plan and IRA investors as effectively as the 2015 Proposed Regulation." (Groom Law Group)
[Guidance Overview] Proposed DOL Regs Include Major Changes to Fiduciary Advice Definition (PDF)
6 pages. "The changes proposed by the DOL to the fiduciary definition will expand the universe of individuals and entities viewed as investment advice fiduciaries to ERISA retirement plans and IRAs. While the proposal includes some helpful exceptions to the application of the new fiduciary definition, these exceptions are relatively narrow. As a result, certain sales activities, and consulting, recordkeeping, participant education and valuation services that do not currently give rise to fiduciary status, would do so under the proposal." (Groom Law Group)
[Guidance Overview] Is Your Rollover Business at Risk Under Proposed Fiduciary Plan?
"Adding rollovers and IRAs to the definition of fiduciary duties, the U.S. Department of Labor's new proposed rule could have a huge impact on firms in a fast-growing and profitable segment of the retirement savings industry. The new proposal will permit broker commissions if certain conditions are met for those advising individuals or small plans rolling over from company 401(k) plans to particular IRAs. The inclusion means that broker dealers and advisors would have to disclose, for instance, if a client would be putting their money in an investment vehicle with a higher fee[.]" (On Wall Street)
[Opinion] Save Our Retirement Coalition's Initial Statement on Rule Protecting Americans' Retirement Savings
"Although some Wall Street interests are attacking the rule already, those attacks ignore numerous provisions specifically designed to accommodate their concerns.... This rule promises to be a major improvement over the status quo, which allows too many financial professionals to offer self-serving investment advice at the expense of their clients' retirement security." (Save Our Retirement Coalition, via Pension Rights Center)
[Guidance Overview] DOL Fiduciary Rule to Revamp Regulation of Advice to Plans and IRAs
"The proposal includes a revised and broader definition of activities that would result in fiduciary status, a series of limited exceptions to fiduciary status, a package of new prohibited transaction exemptions, amendments to current exemptions for existing and newly covered fiduciaries (as well as nonfiduciaries), and a new regulatory impact analysis." (Morgan Lewis)
[Guidance Overview] DOL Re-Proposes ERISA Fiduciary Rule (PDF)
"Much like the 2010 Proposed Rule, the 2015 Proposed Rule is focused more on regulating conduct between retail investors and their advisors than between institutional investors and their advisors. These distinctions appear to be drawn more sharply in the 2015 Proposed Rule." (Fried, Frank, Harris, Shriver & Jacobson LLP)
[Guidance Overview] Definition of the Term 'Fiduciary' -- DOL 'Conflict of Interest' Rule (PDF)
"[T]he carve-outs would cover seven activities of persons who do not represent themselves as ERISA fiduciaries. [1] Seller's Carve-out....[2] Swaps.... [3] Plan Sponsor Employees.... [4] Investment Platform Providers.... [5] Objective Criteria or Financial Data.... [6] ESOP Appraisals ... [7] Investment Education." (fi360)
Worried About Fiduciary Rule? Two Options for Brokers
"ERISA Section 601 exempts brokers from fiduciary status as long as they follow investment advice provided by third-party computer models -- a ruling which encompasses what we now know as robo advisors.... The other workaround is to forego a plan fee and instead be named the fiduciary advisor to participants, as also described in ERISA Section 601.... The risk is that all levels of employees may take you up on your offer for advice, since you may not exclude those with lower balances. One emerging option is to encourage the plan sponsor to add a cost-effective financial wellness or education program for those with simple investment issues or those with minimal assets and significant debt and budgetary issues." (Financial Planning)

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