July 20, 2015

Employee Benefits Security Administration

Office of Regulations and Interpretations

U.S. Department of Labor

200 Constitution Avenue, NW

Room N-5655

Washington, DC 20210

Re: Definition of the Term “Fiduciary;” Conflict of Interest Rule –

Retirement Investment Advice

RIN 1210-AB32 

Dear Sir:

The Blue Cross Blue Shield Association (“BCBSA”) appreciates the opportunity to provide 

comments with respect to the Department of Labor’s (the “Department”) notice of proposed 

rulemaking concerning the Definition of the Term “Fiduciary” of an employee benefit plan

published on April 20, 2015, 80 Fed. Reg. 21928 (the “Proposed Rule”). 

BCBSA is a national federation of 36 independent, community-based, and locally-operated Blue 

Cross Blue Shield Plans (“Blue Plans”) that collectively provide health care coverage for more 

than 106 million – one in three – Americans. Blue Cross Blue Shield Plans offer coverage in 

every market and every ZIP Code in America. Plans also partner with the Government in 

Medicare, Medicaid, the Children’s Health Insurance Program, and the Federal Employees 

Health Benefits Program.

The Department’s objectives in revising the definition of when a person will become a fiduciary 

by reason of the provision of investment advice under ERISA is intended to protect retirement 

investors from the potential conflicts of interest of their advisers. While the Department’s goals 

are important, BCBSA is very concerned that the Proposed Rule may unintentionally, but 

adversely, impact the information and services available to employers that purchase health 

insurance coverage, as well as their employees. This is because, as drafted, the Proposed 

Rule could be read to apply to any recommendation or suggestion made to purchase an 

insurance contract to a sponsor of any ERISA plan. In short, any person that provides helpful 

education and information that might constitute a suggestion or recommendations concerning 

an insurance policy may be a “fiduciary” and face significant liability under ERISA, even when 

they are clearly operating in an educational, marketing and sales capacity. We think this result 

was likely not intended by the Department, particularly since health insurance contracts are 

substantially different than the types of investment vehicles associated with retirement plans, 

which are the clear concerns of the Proposed Rule.

Unless changes are made to exempt health insurance coverage from the Proposed Rule, we 

are concerned that employers that shop for coverage are likely to lose access to valuable 

educational and sales-related information as insurers and agents may end up limiting the 

information they provide to consumers to protect themselves from new liability under ERISA. 

We are also concerned that Blue Plans will have to develop costly new compliance procedures 

to comply with the Proposed Rule even though we believe that regulating the sale of health 

insurance was not a goal of the Proposed Rule. The Proposed Rule would be particularly 
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July 20, 2015

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burdensome on Blue Plans, since many employ their own captive insurance agents and as a 

result Blue Plans themselves could have potential fiduciary liability for the sale of their own 

products. Making these agents fiduciaries to ERISA plans will be particularly challenging since 

they sell only proprietary Blue insurance plans and have no ability to consider or recommend 

coverage from other insurers. There could be many other negative and inadvertent impacts on 

health insurers, including the development of insurance plans through private exchanges, and 

the tools made available to consumers shopping for insurance coverage. These market-driven 

developments create competitive insurance markets and informed consumers and should be 

encouraged, rather than discouraged by the Department. 

Finally, the rule also sweeps in Health Savings Accounts (HSAs), even though such accounts 

are not primarily intended as investment vehicles, but are instead tax advantaged accounts

designed as a tool used by individual employees to accumulate funds to satisfy a variety of out 

of pocket costs not covered by their health insurance plans (such as deductibles and co-pays).

There has been no evidence that imposing regulatory burdens on ERISA-covered insured 

health plans is a necessary part of the Department’s effort to regulate conflicts of interest that 

might affect retirement investors. Nothing in the Proposed Rule, or its regulatory impact 

analysis, suggests that this is the desire or intent of the Department. Moreover, the American 

public would be better served if Blue Plans could direct their limited resources to continuing to 

emphasize compliance with the Affordable Care Act. 

We therefore request a number of revisions to the Proposed Rule that “carve-out” health 

insurance coverage and HSAs from the scope of the Proposed Rule. By carving out health 

plans the Department would be acting consistently with its decision to exempt health plans from 

its service provider disclosure rule (under ERISA section 408(b)(2)), which it finalized just three 

years ago. And by carving out HSAs the Department would be acting consistently with its 

decision to exempt HSAs from ERISA when it issued Field Assistance Bulletins in 2004 and 

2006.

BCBSA’s recommendations on the Proposed Rule are as follows:

I. A “carve-out” should be provided in the regulation so that recommendations 

related to insurance contracts that are used to fund health and welfare benefits, 

including medical, dental, life, death and dismemberment, disability, and other 

similar insurance coverages, are clearly excluded from “fiduciary advice”

regardless of the size of the ERISA plan. This should be an unconditional carveout (e.g., no disclosure and consent by the plan sponsor should be required). 

II. The marketing of private exchanges to a plan fiduciary should be subject to an 

unconditional carve-out from the definition of “fiduciary advice.”

III. The carve-out BCBSA recommends should also extend to circumstances where 

insurers, private exchanges and others develop and use web-based and similar 

computer driven tools that assist consumers in selecting among various 
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insurance plan options that an employer may make available to them under their 

ERISA group plans.

IV. HSAs should also be carved-out completely from the regulation based on their 

fundamental distinctions from IRAs and other retirement plan investment 

vehicles. If a complete carve-out for HSAs is not provided, the Department (1) 

should exempt any HSA holding less than $5,000, reflecting the fact that smaller 

HSA accounts should not be treated as investment funds, (2) the Proposed Rule’s 

platform carve-out should be expanded to cover HSAs, and (3) the Proposed 

Rule’s education carve-out should explicity cover information provided to HSA 

holders regarding the benefits, features and uses of HSAs. 

BCBSA’s more detailed comments are attached.

We appreciate the opportunity to provide comments regarding the Proposed Rule and look 

forward to continuing to work with you as you finalize and implement this regulation. If you have 

any questions, please contact Jane Galvin at jane.galvin@bcbsa.com or 202.626.8651.

Sincerely,

Justine Handelman 

Vice President, Legislative and Regulatory Policy 

Blue Cross Blue Shield Association
Definition of the Term “Fiduciary”;

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BCBSA Comments and Recommendations on

DOL’s Proposed Rule addressing the Definition of the Term “Fiduciary”;

Conflict of Interest Rule—Retirement Investment Advice

I. Agents, Brokers and Consultants who Recommend Health and Welfare Insurance 

Policies to Employers for ERISA-covered Plans could be Fiduciaries based on 

their Recommendations Alone

Issue: Agents, Brokers and Consultants who recommend group insurance policies to sponsors 

of ERISA-covered health and welfare benefit plans could become “fiduciaries” under DOL’s 

Proposed Rule based on their recommendation of one or more insurance policies.

Recommendation: The regulation should be modified so that recommendations of insurance 

contracts to ERISA-covered health and welfare plans and their participants are clearly excluded 

from the definition of “fiduciary advice.” Specifically, we recommend that the Department 

incorporate into the final rule a new “carve-out” from fiduciary status for the purchase, sale or 

holding of an insurance contract that is used to fund health and welfare benefits. The exception 

would apply without conditions and regardless of plan size.

If an unconditional carve-out as described above is not acceptable, BCBSA proposes that the

Proposed Rule’s existing counterparty exception be available for the purchase, sale or holding 

of a group insurance contract that is used to fund health and welfare benefits. This exception 

would apply regardless of plan size.

Rationale: Under the Department’s current regulation defining investment advice, ordinary 

education, marketing and sales activities for group health insurance policies typically would not 

become fiduciary advice. The Proposed Rule substantially expands the circumstances in which 

persons providing recommendations to plan sponsors, employers or plan participants would be 

considered “investment advice” fiduciaries. Specifically, under the Proposal, fiduciary advice 

would include a “recommendation” as to “the advisability of acquiring, holding, disposing or

exchanging securities or other property” if it is provided under an agreement, arrangement or

understanding that the advice is individualized to, or specifically directed to, the advice recipient 

for consideration in making investment or management decisions with respect to securities or

other property. DOL Prop. Reg. 2510.3-21(a)(1), (2)(ii). 

Importantly, while the BCBSA believes the definition of investment advice is focused on 

retirement plans and IRAs that hold assets for investment, neither the Proposal nor the

Department’s current regulation distinguishes between retirement plan advisers and advisers to 

welfare plan fiduciaries. Instead, if all of the elements of the investment advice definition are 

met, a recommendation to purchase “securities or other property” could result in fiduciary status, 

whether the recipient of that recommendation is a pension plan fiduciary or the fiduciary 

(typically the employer plan sponsor) of a health plan, or any other “welfare” plan, such as a life 

insurance or disability plan. And, under current law and the Proposal, an insurance policy 
Definition of the Term “Fiduciary”;

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funding a heath, life or disability plan is considered to be “securities or other property.” See

Preamble to Proposed Class Exemption PTE 77-9, 41 Fed Reg. 56760, 56762 (Dec. 29, 1976) 

(DOL recognizes that advice and recommendations made by insurance agents could rise to 

“investment advice so as to classify the persons who furnish such advice as fiduciaries.”); 

Capital Creation Co. v. Metropolitan Life Ins., No. 1:90CV1322, 1992 WL 218296, at *10 (N.D. 

Ohio Aug. 26, 1992) (the provider rendered investment advice as to the value “of securities or 

other property” when it made “recommendations to the Beazer Plan as to the advisability of 

investing in, purchasing, or selling group annuity contracts.”).

Agents, brokers and consultants to insured group health welfare plans provide a variety of 

information and advice to plan sponsors, including information about the relative financial 

strength of insurers, differences between various insurance coverages, explanations of key 

features under competing policies, and pricing. With respect to pricing, the information and 

advice may not be limited to differences between competing bids, but the consultant may also 

evaluate proposed pricing as it relates to the plan’s past and expected experience under the 

policies. These agents and brokers provide invaluable expertise to an employer that helps the 

employer to match an appropriate policy to its employee population, in many cases based on 

the unique needs of the employer’s group. Agents and brokers may ultimately “suggest” that the 

employer select a particular insurance policy. If these activities could give rise to fiduciary 

status under DOL’s regulation for agents and brokers, then any payment to the agent (including 

a consulting fee or an insurance commission) would solidify fiduciary status as well as cause a 

prohibited transaction, unless an exception or prohibited transaction exemption is available. 

Without limits on the Proposed Rule’s scope, BCBSA believes that recommendations to 

purchase many forms of group welfare insurance contracts could be swept into the rule, 

including group medical, dental, life, disability, long term care, accidental death and 

dismemberment. 

Moreover, subjecting those who recommend health insurance contracts to ERISA’s fiduciary 

requirements would create particular market disruptions for Blue Plans that the Department 

could not have intended and are not in the interest of plan participants. In particular, many Blue 

Plans employ their own captive agents (who are employees of the Plan) who can only 

recommend Blue insurance plans. We are concerned that if Blue Plan captive agents are 

fiduciaries they may be exposed to meritless ERISA claims for selling only affiliated products. 

Exposing Blue Plans to potential litigation for selling only affiliated products make no sense 

because the employer group that buy Blue products fully understand that a Blue Plan agent can 

only sell affiliated products and would have already determined that they want to access the 

Blue Plan insurance policy.

Under the Proposal, there are two possible strategies for permitting agents, brokers and 

consultants to receive commissions in connection with the placement of insurance with ERISA 

plans, but each has limitations or uncertainties. First, advice incidental to the sale of an 

insurance policy may qualify for the Proposal’s “counterparty carve out,” an explicit exception to 

fiduciary status under the Proposal. DOL Prop. Reg. 2510.3-21(b)(1)(i)(B). However, this 

exception is available only for the sale of insurance to large plans (plans with 100 or more 

participants) and it is conditioned on disclosure to the prospective client of the “interests” the 
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person has in the sale of the insurance (e.g., the commissions and other payments received) as 

well as the client’s written acknowledgement that the agent, broker or consultant is not 

undertaking to provide impartial advice--all of which must be provided in advance of any 

recommendations. In addition, the agent, broker or consultant may not receive any 

compensation directly from the plan for the provision of the advice. Second, the agent, broker 

or consultant could rely on Prohibited Transaction Exemption (“PTE”) 84-24 to receive an 

exemption for the conflict of interest created by the potential for the commission. That 

exemption currently requires advance disclosure to and consent of the employer before the 

policy is purchased (but not before the advice is given) and this exemption is being amended by 

the Proposal to require additional “conflicts” disclosures and a new “best interest” standard of 

conduct.

Although these approaches may technically be available, they introduce significant complexity 

based on the size of the plan sponsor, create fiduciary liability for merely selling insurance to 

smaller plans, impose disclosure obligations on Plans, and require the consent of the plan 

sponsor. BCBSA simply does not view guidance with respect to health and welfare insurance 

contracts to be fiduciary “investment advice.” Buying a health and welfare plans insurance 

contract is fundamentally different than retirement investing. The purchaser of the insurance 

contract knows the cost of the policy and the benefits in advance. Any fees or sales 

commissions associated with the contracts do not affect the benefits that will be received. This 

contrasts starkly with retirement plans, where the costs of investment options could actually 

reduce the retirement benefit itself, and the fees paid to financial advisers could create 

incentives to invest amounts in higher-cost or lower-returning investments. 

Finally, we note that the Proposed Rule could actually create new incentives for employers to 

self-insure their health plans. This is because under the Proposed Rule agents could become 

fiduciaries for recommending an insurance contract (which is “other property” as noted above). 

But the same agent may not become a fiduciary for recommending an administrative services 

only arrangement (because they are recommending an administrative “service” rather than 

“property”). 

As such, BCBSA recommends that the Department modify the Proposed rule and to carve-out 

recommendations to purchase insurance contracts for health and welfare plans. In so doing, 

the Department would be acting consistent with its exemption for health and welfare plans when 

it issued its service provider disclosure regulation under ERISA section 408(b)(2) (issued in final 

form in 2012). 

II. The Marketing of a Private Exchange Should not be Fiduciary Advice 

Issue: It is not clear whether the marketing or offering of a private exchange itself would be 

deemed to be fiduciary advice under the Proposed Rule. This is because such marketing 

efforts may involve “recommendations” of a platform of insurers and insurance policies offered 

through the private exchange.
Definition of the Term “Fiduciary”;

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Recommendation: As recommended in section I above, BCBSA requests that the Department 

incorporate into the final rule a new carve-out from fiduciary status for the purchase, sale or 

holding of an insurance contract that is used to fund health and welfare benefits. The exception 

would apply without conditions and regardless of plan size. This carve-out should be broadly 

applicable to the recommendations of policies offered through a private exchange or the 

recommendation of the private exchange itself.

If an unconditional carve-out is not provided, then the Proposed Rule’s existing counterparty

carve-out should be expanded to cover any recommendations of exchanges, insurers or 

insurance policies offered in connection with an ERISA-covered health and welfare plan 

regardless of plan size.

Rationale: Many private parties, including insurers, are offering insurance products to 

employers though a private exchange. Private exchanges (and services associated with the 

exchange) provide a means for employers to outsource the administrative burdens and legal 

complexity associated with offering a group health plan. The exchange provider would typically 

perform such functions as distributing SPDs, maintaining a call center for employees, assisting 

in enrollment and making eligibility determinations. The exchange also creates a simple

consumer shopping experience, where employees can readily compare the benefits and costsharing features of various plans. 

BCBSA is concerned that recommending a private exchange (and the different insurance 

policies on the exchange) could give rise to fiduciary status under the Proposed Rule. This is

because the Department has already suggested that offering an investment platform could be 

fiduciary advice and requires a “platform carve-out.” We are also concerned because fiduciary 

status may be triggered by any recommendation to a plan fiduciary “as to the advisability of 

acquiring, holding, disposing or exchanging securities or other property....” DOL Prop. Reg. 

2510.3-21(a)(1). And the term “recommendation” is defined broadly as meaning any 

communication that, based on its context, would reasonably be viewed as a “suggestion” that 

the advice recipient engage in or refrain from taking a particular course of action. DOL Prop. 

Reg. 2510.3-21(f)(1). Under this sweeping framework, the marketing of a private exchange to 

an employer who sponsors an ERISA-covered group health plan for its employees could 

arguably involve one or more “recommendations” of the insurers or insurance policies that are 

offered on the exchange.

BCBSA believes that the marketing of private exchanges that offer employers and employees 

access to individual insurance policies should not be swept into fiduciary conduct. Without this 

clarification, the added fiduciary liability and administrative complexity associated with 

compliance with a class exemption (such as PTE 84-24 or the proposed Best Interest Contract 

exemption) could increase costs, compliance burdens, and dissuade companies from offering

private exchanges at all. 
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III. Advice to Participants regarding Individual Insurance Polices available through a 

Private Exchange should not be Fiduciary Advice

Issue: Web-based and similar computer generated tools that provide information to plan 

participants regarding insurance options that may be appropriate for them should not give rise to 

fiduciary liability under the Proposed Rule.

Recommendation: As recommended in section I above, BCBSA requests that the Department 

incorporate into the final rule a new carve-out from fiduciary status for the purchase, sale or 

holding of an insurance contract that is used to fund health and welfare benefits. The exception 

would apply without conditions and regardless of plan size. This carve-out should be broadly 

applicable to permit web-based, computer-generated information and recommendations to plan 

participants as to which plan option may be appropriate for the participant. 

Rationale: Employers may make a variety of different plan options available to plan 

participants (e.g., HMO, PPO, different deductibles, different networks). This is increasingly 

common now that employers may offer many insurance options via a private exchange. Tools 

are being developed that assist consumers in determining what option may be appropriate for 

them, given their circumstances. These tools are commonly computer generated web-based 

tools that take into account a variety of information, including income level, dependents, health 

status, cost-sharing preferences, geographic location, preferred providers, etc.

BCBSA is concerned that a recommendation made to a plan participant regarding various 

insurance options could give rise to fiduciary status under the Proposed Rule. However, 

individualized recommendations about health plan insurance options should not be the subject 

of the Proposed Rule, which is focused on retirement plans and conflicts of interest faced by 

financial advisers. Given the complexity of the health care options, individuals need access to a 

wide variety of information sources so they can make good consumer choices that reflect their 

individual circumstances.

IV. Relief Should Be Granted for Health Savings Accounts

 

Issue: HSAs are explicitly covered by the Proposed Rule even though they are not retirement 

accounts and even though they generally have very low account balances that are used to fund 

current medical costs. In addition, under the Proposed Rule a custodian’s offering of a 

“platform” of investments to an HSA might make the custodian a fiduciary since there is no 

“platform” carve-out for HSAs. 

Recommendation: The Proposed Rule needs to be revised to exempt HSAs entirely. If a 

complete carve-out for HSAs is not provided, the Department (1) should exempt any HSA 

holding less than $5,000, reflecting the fact that smaller HSA accounts should not be treated as 

investment funds, (2) the Proposed Rule’s platform carve-out should be expanded to cover 

HSAs, and (3) the Proposed Rule’s education carve-out should explicitly cover information 

provided to HSA holders regarding the benefits, features and uses of HSAs. 
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Rationale: HSAs are fundamentally different from IRAs and other retirement vehicles. 

Instead, they are tax-advantaged accounts that may be used to fund cost sharing and other 

medical expenses not covered by a high deductible health plan. HSAs generally hold amounts 

that are less than the deductible amounts required under the associated group health plan. In 

2014, the average HSA account balance was about $2,000.1 Moreover, investment options are 

an optional feature of HSA products and many HSA providers do not even make investment 

options available in connection with HSAs. As such, only a small number of accountholders 

actually utilize investment options.2

 Instead, the vast majority of HSA assets are held in bank 

deposit arrangements that utilize debit cards or checking features to make payments. Unlike 

IRAs, HSA account holders are not subject to penalties for any “early” use of funds, nor can 

HSAs accept rollover contributions. These facts demonstrate that HSAs are designed and 

utilized in the vast majority of cases as a source of ready funds for current medical expenses 

and will not accumulate a significant amount of assets from year to year. Because of their 

special nature, DOL generally recognized that HSAs should be exempt from ERISA, even 

where an employer takes steps that would normally amount to “endorsement” under ERISA. 

DOL Field Assistance Bulletin 2004-01 (Apr. 7, 2004); Field Assistance Bulletin 2006-02 (Oct. 

27, 2006). Because the DOL has carved HSAs generally out of Title I of ERISA, it does not 

make sense to subject HSA providers to the detailed requirements and compliance regimes 

associated with the Proposed Rule. 

Nonetheless, the Proposed Rule specifically includes HSAs in its definition of covered plans. As 

such, virtually any information to an HSA accountholder on how to allocate their assets is going 

to be fiduciary advice. In addition, an HSA provider (e.g., bank, custodian) may be a fiduciary 

simply by making investments available to the HSA because the Proposed Rule’s platform 

carve-out does not extend to HSAs (and IRAs generally). This is inappropriate given the limited 

investment opportunities available through HSAs. 

Because HSAs are not designed to serve as retirement vehicles, we ask that the Department 

remove HSAs from the definition of a “plan” subject to the Proposed Rule. This would be 

entirely consistent with the Department’s determination to generally exempt HSAs from ERISA 

when it issued the FABs in 2004 and 2006. Absent a complete exemption, we recommend that 

the Department (1) should exempt any HSA holding less than $5,000, reflecting the fact that 

smaller HSA accounts should not be treated as investment funds, (2) the Proposed Rule’s 

platform carve-out should be expanded to cover HSAs, and (3) the Proposed Rule’s education 

carve-out should explicity cover information provided to HSA holders regarding the benefits, 

features and uses of HSAs.

 1 See EBRI Issue Brief #409, Health Savings Accounts and Health Reimbursement Arrangements: 

Assets, Account Balances, and Rollovers, 2006-2014, January 2015, available at 

www.ebri.org/publications/.

2 See 2014 Year-end HSA Market Statistics and Trends, Executive Summary, available at 

www.devenir.com/research/2014-year-end-devenir-hsa-market-research-report/.