Center for American Progress

CAP Comments on Department of Labor Fiduciary Rule Proposal

CAP Comments on Department of Labor Fiduciary Rule Proposal

The Center for American Progress submitted comments to the Employee Benefits Security Administration supporting proposed changes to the regulation that defines fiduciary standards.

On January 2, 2024, the Center for American Progress submitted a comment letter to the Employee Benefits Security Administration (EBSA), an agency of the U.S. Department of Labor, in support of the EBSA’s proposed changes to the regulation that defines when a person is providing investment advice such that they are acting as a fiduciary under the Employee Retirement Income Security Act (ERISA).

Americans spend their working lives saving for retirement so that they have sufficient funds to retire with dignity. They often seek retirement investment advice from financial advice providers who can help them meet their retirement goals. Due to gaps in the existing rule that implements the fiduciary standard under ERISA, some retirement advice providers do not put their clients’ best interests first. They instead charge excessive or hidden fees or recommend one retirement investment product over another based on commissions they receive instead of their client’s best interests.

In October 2023, the EBSA released a proposal to protect millions of retirement savers from these junk fees when they seek advice from firms or individuals who provide retirement investment advice for a fee or other compensation. The proposal would reform the definition of who is a fiduciary to any financial services provider who provides retirement investment advice or a recommendation for a fee or other compensation under circumstances where the retirement investor would reasonably expect a relationship of trust and confidence. The proposal would further protect retirement investors by requiring these trusted advice providers to avoid engaging in transactions where they have conflicts of interest that could lead them to favor their own interests over their client’s.

CAP’s comment letter emphasizes that Congress gave the EBSA broad authority to develop fiduciary standards for retirement advice providers in part to cover gaps in investor protection created when advice providers do not fall under fiduciary standards of other financial regulators. Those gaps have proliferated since the existing rule was released in 1975. Most employer retirement plans used to guarantee specified benefits to employees who retire, but today, most employee plans require the employee to manage their own retirement investments. To complicate matters, financial products and firms have expanded and diversified into a confusing array of options that most retirement investors find challenging to navigate. Without the ability to depend on financial advice providers, retirement investors can fall victim to advice that does not put their best interests first.

Click here to read CAP’s comment letter.

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Alexandra Thornton

Senior Director, Financial Regulation


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