Development of DOL planning rules on the “fiduciary” definition
The Labor Department under the Biden administration seeks to mark the fiduciary debate, much like the Obama and Trump administrations before it.
The Labor Ministry plans to publish a proposed rule on the definition of “fiduciary”, in accordance with its biannual regulatory program, released on June 11.
The rule development would change the regulatory definition of the term fiduciary “to more appropriately define when persons who provide compensation for investment advice to employee benefit plans and IRAs are trustees” within the meaning of the Federal Act. employee retirement income security and the Internal Revenue Code, according to an explanation from the Department of Labor.
In addition, the amendment “would take into account the practices of investment advisers, the expectations of plan managers and participants, and IRA owners who receive investment advice, as well as developments in the investment market. , including compensation arrangements for advisers who may be subject to harmful conflict of interest advisers, ”the Labor Department said.
The Employee Benefits Security Administration will also assess available exemptions for prohibited transaction categories and consider proposing changes or new exemptions to “ensure consistent protection of employee benefit plans and individual retirement account investors.” , added the Department of Labor.
EBSA plans to issue a notice of regulatory proposal on the fiduciary issue by December, according to the agenda.
The agenda also includes a review of the Ministry of Labor’s “Financial Factors in Selecting Plan Investments”, which states that ERISA plan trustees cannot invest in “non-cash” vehicles that sacrifice returns on investment. investments or take additional risks, and the “Trustee Duties Regarding Proxy Voting and Shareholder Rights,” which describes the process a trustee must undertake when making decisions regarding the exercise of a proxy vote. . Both rules were enacted under the Trump administration, but in March the new Biden administration announced it would not enforce the rules.
The ministry is also working on a proposal for 5500 forms. The Setting Every Community Up for Retirement Enhancement Act, which was enacted in late 2019, requires the implementation of a consolidated annual report for certain groups of similar plans at the latest. January 1, 2022, which should apply to the Annual Return Form 5500. / reports for plan years beginning after Dec.31, 2021, the Ministry of Labor noted in a description.
Additionally, a final rule on lifetime income artwork is expected by July. In August 2020, the Department of Labor, as required by the SECURE Act, released an interim final rule outlining how plan sponsors would convert participant account balances into an estimated monthly income stream at retirement.
Under the Interim Final Rule, pension plans would provide illustrations of lifetime income forecasts using prescribed assumptions, based on information such as the member’s marital status and assumed age at start of retirement. annuity. But during a comment period last year, stakeholders made repeated calls to change the assumptions used to calculate lifetime income projections.