The “USA Retirement Funds” legislation introduced Jan 30 by Sen. Tom Harkin (D-Iowa) includes a provision that would aid legislatively the Department of Labor’s regulatory effort to redefine the term “fiduciary.” The bill would express the “sense of Congress” that advising a plan participant to take a permissible plan distribution and then make a recommendation regarding how to invest it would constitute providing investment advice under ERISA.
The bill also calls on the DOL to issue guidance on how ERISA applies to advice regarding rollovers within three months after the measure is enacted and directs the GAO to study whether investment professionals know their fiduciary duty under ERISA and the tax code.
The entire provision reads:
SEC. 212. ROLLOVER PROTECTIONS.
(a) SENSE OF CONGRESS.—It is the sense of Congress that a person may be providing investment advice within the meaning of section 3(21) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(21)) when such person advises a plan participant to take a permissible plan distribution and such distribution advice is combined with a recommendation as to how the distribution should be invested.
(b) GUIDANCE.—Not later than 90 days after the date of enactment of this Act, the Secretary of Labor shall issue guidance consistent with subsection (a) clarifying the applicability of section 3(21) of the Employee Retirement Income Security Act of 1974 to investment advice provided in connection with distribution recommendations.
(c) FIDUCIARY AND PROHIBITED TRANSACTION AWARENESS.—The Comptroller General of the United States shall study the extent to which advisors, broker-dealers, and other financial professionals dealing with individual and employer-provided retirement plans are aware of, and receive ongoing training regarding, the requirements of part 4 of subtitle B of title I of the Employee Retirement Income Security Act (29 U.S.C. 1101 et seq.) and section 4975 of the Internal Revenue Code of 1986.
The Comptroller General shall submit a report to the Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Education and the Workforce of the House of Representatives summarizing its findings and including recommendations regarding ways to improve awareness of and compliance with the fiduciary and prohibited transaction rules.
Harkin has announced that he will not seek reelection to the Senate after his current term expires next January. The legislation is now before the Committee on Health, Education, Labor, and Pensions. The full text of the bill is online here.
John Iekel is a writer/editor for ASPPA and its sister organizations, including NAPA Net.
