Newly Proposed Fiduciary Rule ‘A More Standard Approach’

John Iekel 

The Department of Labor (DOL) on Oct. 31, 2023 issued the latest iteration of a proposed rule defining who is an investment advice fiduciary for purposes of ERISA. As the initial dust settles, officials from the DOL’s Employee Benefits Security Administration (EBSA) have offered some further insights. 

Speaking at multiple Nov. 6 sessions moderated by Brookings Institution Senior Fellow Mark Iwry at the SPARK Forum, DOL Principal Deputy Assistant Secretary at EBSA Ali Khawar discussed the purpose of the newest version. In the afternoon session, he was joined by Joe Canary, Director of EBSA’s Office of Regulation and Interpretation.

Simple Is as Simple Does

The latest iteration of the fiduciary rule—now dubbed the “retirement security rule” by the DOL—is intended to be different than its predecessors, the officials indicated. 

The 2016 rule was complicated, Canary said, telling attendees, “This attempt is a more standard approach.” He added that the version just released is an effort to simplify the rule and make it easier to understand. 

Khawar said of the newly released proposed rule that part of the reason the DOL issued it was that “too often goals and reality are not in line.” And, he noted, another goal is to better reach financial professionals. 

Not Anti-Conversation

Khawar said that the intention with the rule is not to turn every conversation into a fiduciary conversation. Rather, he said, “when giving advice, it should be treated as advice.” The way to ensure that recommendations are happening properly is to make sure that policies and procedures are in place, he said. 

Investor Carve-out

Khawar noted that there was no sophisticated investor carve-out in the new version. He said that is because the context for those transactions is not the same as it was for small businesses nor for individual investors. 

Feedback

When asked if the DOL has thought about offering more time for comment on the proposed rule, Khawar responded that it is “important to put this proposal in context.” 

“This is not the first bite of this particular apple,” Khawar said, adding that there “really have been 15 years of work on this” and that the DOL’s work on it has been almost continuous. He said that the DOL “didn’t think they needed more time” to gather comments.