On September 19, 2011, the Department of Labor (“DOL”) announced that it will withdraw and re-propose its regulations on a revised definition of a “fiduciary” under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In our October 26, 2010 client alert, we discussed the DOL’s initial proposed revised definition of a “fiduciary” which would have significantly expanded which individuals and what entities would be considered a “fiduciary.” When the DOL submitted the 2010 proposed regulations, the DOL indicated that significant changes had been made in the investment advice industry since the ERISA fiduciary definition regulations were issued in 1975. In the DOL’s view, these changes necessitated significant changes to whom and what is considered an ERISA fiduciary.
The DOL has received a substantial number of comments and both the DOL and Congress have been the recipients of substantial lobbying efforts regarding the 2010 proposed regulations. The DOL noted that it had already received more than 260 written public comments in addition to the comments made during two days of open hearings and numerous meetings with interested parties. Many of the comments and much of the lobbying efforts have focused on the expanded definition of an ERISA fiduciary. In its September 19th news release, the DOL stated that it is re-proposing the regulations to allow time for additional comments. The DOL’s stated goal for the new proposed regulations will be to provide consumer protection, but avoid unjustified costs and burdens.
The DOL anticipates that its new proposed regulations will clarify that ERISA fiduciary status is limited to “individualized advice directed to specific parties…” When the new proposed regulations are issued, the DOL also intends to propose ERISA Class Exemptions addressing concerns that have been raised about currently permitted fee practices, including commissions on investment products, such as mutual funds and insurance products.
The DOL anticipates issuing the re-proposed regulations in early 2012. We will be monitoring the future issuance of the proposed regulations. In the meantime, should you have any questions, please contact your SGR Executive Compensation and Employee Benefits counsel.