A former Department of Labor official said yesterday that she thinks that the agency will look to change the definition of a fiduciary in new rules it is expected to release soon.

The agency wants to take a fresh look at how the fiduciary standard applies to individuals who provide advice to retirement plan and IRA users. Phyllis Borzi, the former head of the Labor Department’s Employee Benefits Security Administration, said she believes that the agency will move to change the 1975 definition of a fiduciary.

In a panel discussion entitled “The State of Fiduciary Advice in 2022,” sponsored by the Institute for a Fiduciary Standard, Borzi gave her thoughts on what the new rule will look like. Along with the new definition, she anticipates the DOL will also change Prohibitive Transaction Exemption (PTE) 8424, which provides a fiduciary exemption for the insurance industry. 

The road to a final fiduciary rule has been fraught with legal challenges and delays. Labor finalized a rule in 2016 before it was struck down by the 5th Circuit Court of Appeals in 2018. Borzi said that the ruling, which found the DOL had overstepped its authority in adopting the rule, will serve as a challenge for any future rules in the area.

“Deciding how to tailor new guidance in light of the 5th Circuit makes [the Labor Department’s] task even more difficult,” she said.

However, Borzi also told the audience that they are going to have to wait before seeing anything on the subject come from the agency. Despite the agency placing it on its regulatory agenda for this year, Borzi said next year as a more realistic expectation.

A major reason for the delay, she said, is the amount of work Labor has on its agenda with 18 regulatory projects. She also cited litigation involving the agency's fiduciary rules. 

“I think the complication here is these lawsuits,” she told the audience. “I have no inside information, but if I was still at the department, I’m sure we would be talking about waiting for regulatory activity till we see what the courts do whether they dismiss these two lawsuits.”

The first lawsuit, filed by the Federation of Americans for Consumer Choice (FACC), a group that represents independent insurance distributors, is over PTE 2020-02, which the DOL published in 2020. It is designed to remove several loopholes that exist in a five-part test that the DOL uses to determine if a person is a fiduciary. In its lawsuit, the FACC argued that PTE 2020-02 reused language from the 2016 rule, which the court vacated. 

The second lawsuit, filed by the American Securities Association, concerns a series of frequently asked questions (FAQs) that the DOL published in 2021. 

First « 1 2 » Next