Count Empower and its CEO Edmund F. Murphy III among those that want the Department of Labor to withdraw its controversial proposed “Retirement Security Rule: Definition of an Investment Advice Fiduciary.”
In a comment letter submitted to the DOL on Dec. 20 regarding the rule, Empower publicly revealed its stance on the matter for the first time, and said the proposal redefining who is an investment advice fiduciary would impose significant new hurdles to employers sponsoring retirement plans and is in conflict with the efforts of Congress to expand access to workplace retirement plans.
In addition, Denver-based recordkeeper Empower is concerned that the new proposal is not materially different from a prior rulemaking effort that was vacated by the Fifth Circuit Court of Appeals in 2018. A new final rule could face similar court challenges and ultimately meet the same fate. Meanwhile, across the financial services industry, firms will invest heavily to implement the rule that faces a strong possibility of being struck down, notes Empower.
“This proposed rule is adding hurdles to plan formation, not removing them.”
Empower CEO Edmund Murphy III
“The proposed rule should be withdrawn immediately because it will make it more difficult for providers to share information with employers who need to make prudent decisions about their retirement plan,” said Empower leader Murphy. “This proposed rule is adding hurdles to plan formation, not removing them.”
Murphy added that the workplace savings system has been an effective public-private partnership for decades and it has had the effect of driving better financial security for millions of Americans. “This new proposal and the aggressive nature by which the DOL is advancing it runs counter to that great partnership, and that’s setting a terrible precedent,” he said.
Recognized as the second-largest retirement services provider in the U.S. by total participants, Empower serves all segments of the employer-sponsored retirement plan market: government 457 plans; Taft-Hartley plans; small, mid-size, and large corporate 401(k) clients; nonprofit 403(b) entities; private-label recordkeeping clients as well as wealth management, brokerage and IRA customers. Empower administers approximately $1.4 trillion in assets for more than 18 million investors.
Empower notes in its comment letter that the “breadth of the Proposed Rule could prohibit activities—like sales conversations and plan sponsor investment conversations—that have traditionally not been considered fiduciary activities. By assigning fiduciary status to plan sales, the Proposed Rule could reduce the flow of information to employers looking to sponsor retirement plans. This may reduce plan formation and appears to run contrary to Congressional intent, specifically the SECURE Act and SECURE 2.0, which incentivized plan formation.”
“This would potentially include request-for-proposal responses to requests for fund lineup suggestions, fund discussions with third party advisors serving as a fiduciary to a plan and discussions with existing clients regarding changes to their fund lineup,” writes Empower in the letter, which is signed by Murphy.
If enacted, the new rule could significantly alter conversations between investment providers, employers sponsoring retirement plans and their advisors because, as written, definitions of such conversations are so broad that they could create liability for the parties involved.
In addition, Empower notes that the new rule may alter some disclosure requirements in ways that are not productive to either providers or individuals and are written in a way that they are too vague to be useful. In amendments to existing prohibited transaction exemptions, the rule significantly expands the disclosure requirements, requiring information that is not adequately defined, not publicly available, and duplicative. There is also the question of whether the information is actually useful to the recipient.
The deadline for submitting comments to the DOL regarding the proposed rule is Tuesday, Jan. 2, 2024. To view all comment letters submitted to the DOL, visit https://www.regulations.gov/document/EBSA-2023-0014-0001
SEE ALSO:
• DOL Retirement Security Hearing: Groups Express Both Support and Strong Opposition
• DOL Fiduciary Rule Released; Industry Reaction Pours In
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
