As mentioned in my last blog, one of the things we felt would likely occur with an Obama re-election was that the Department of Labor would re-propose a new definition of fiduciary under ERISA. Well, it has occurred or at least it appears it is going to. Almost a week to the day after the election, Assistant Secretary of Labor Phyllis Borzi announced that a proposal to "modernize" this definition has been submitted to the administration for clearance and would be issued in early 2013. This is definitely a priority item for Ms. Borzi and one she intends to try to sheperd through the regulatory process.
We don't know yet what it says but Borzi did indicate that the proposal included a "robust" economic analysis related to the impact of the new fiduciary definition. She went on to indicate that the benefits far outweighed any increased costs associated with the new definition. If you recall, the DOL indicated that the lack of this economic impact study was what caused them to withdraw the proposed fiduciary definition the first time it was issued. As I said in the blog issued prior to the election, the DOL had said that the lack of an economic impact study was the reason for the initial withdrawal but many felt that the bipartisan opposition and political pressure placed on the DOL really was the primary reason the regulation wasn't pushed ahead. It will be interesting to see what changes, if any, were made to this definition of fiduciary as compared to what was issued in 2010 and if there has been a movement towards alleviating some of the concerns that were raised with the prior proposal. If what we see is similar to what the DOL did then, there is some concern over what advice, if any, plan participants and IRA accountholders would receive. Many in the financial industry have indicated that they would not be able to economically provide advice to these individuals if they have to meet ERISA fiduciary standards as specified in that original proposal. We are waiting to see, with great interest, what this proposal says and what the reaction of both the financial industry and the political establishment will be. As you can tell, this is an extremely important issue and one that we will continue to follow and comment on.
