August 13, 2015
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Council testifies before Department of Labor
Proposed fiduciary liability rules seems at odds with plan sponsor efforts to engage participants and encourage educated choices
WASHINGTON, DC "The Department of Labor's redefinition of who assumes 'fiduciary' responsibilities under ERISA seems at odds with employer efforts to facilitate employee engagement," testified Lynn Dudley of the American Benefits Council at a hearing today regarding DOL's proposed conflict of interest rule governing employee benefit plans and their sponsors. "Plan sponsors are trying to enhance employee education and encourage participant engagement in their benefit programs using internal and external resources. Employers are concerned that the new conflict of interest and fiduciary definition rules will generate uncertainty, cost and potential liability. Without changes, this would result in employers pulling back on the tools they currently offer and could hurt the very people the Department is trying to protect."
Dudley, the Council's senior vice president, global retirement and compensation policy, testified that the proposed rules will impact employee assistance and benefits education programs including call centers, on-site benefits briefings, the availability of human resources personnel to answer some basic questions asked by employees, investment education and external investment advisory programs.
"Plan sponsors are concerned that the standard for fiduciary advice is too easy to trigger," she said. "The proposed generic information permitted as 'education' in the proposal would not be directly responsive or provide sufficient context to be useful to plan participants in many cases."
Dudley noted that "a fiduciary relationship should not be treated as 'existing' unless both the parties mutually understand and acknowledge that the individualized recommendations provided in connection with an employer-sponsored plan will play a significant role in the recipient's financial decision-making and reflects the considered judgment of the advisor."
Several safe harbor provisions to the proposed regulation would also assist plan participants and sponsors. One would cover a plan sponsor from co-fiduciary liability for the acts of any employee or service provider if that employer establishes, communicates and reasonably follows a clear written policy. A similar safe-harbor would also allow the plan sponsor's employees to not be considered fiduciaries if they unintentionally violate the policy or do so a minimum number of times.
She also requested that the definition of "education" continue to allow specific investment funds in the plan to be identified and linked to illustrative models available to participants. "This tool currently helps employees," Dudley stated. "Taking it away would require plan participants to seek additional information elsewhere at their own expense."
Finally, Dudley urged regulators to minimize disruption and provide a substantial transition period - allowing for many of the uncertainties and problems to be resolved before requiring that the new rules be implemented.
For more information, or to schedule an individual interview with Dudley or other Council staff, contact Deanna Johnson at firstname.lastname@example.org or by phone at 202-289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.