Filed Electronically at Regulations.gov 

July 21, 2015 

Office of Regulations and Interpretations Office of Exemption Determinations 

Employee Benefits Security Administration Employee Benefits Security Administration 

Attn: Conflict of Interest Rule Attn: D-11712 

Room N-5655 Suite 400 

U.S. Department of Labor U.S. Department of Labor 

200 Constitution Avenue N.W. 200 Constitution Avenue N.W. 

Washington, DC 20210 Washington, DC 20210 

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

Investment Advice (RIN 1210-AB32)

 Proposed Best Interest Contract Exemption (ZRIN 1210-ZA25)

Dear Sir or Madam: 

The SPARK Institute, Inc.1 appreciates the opportunity to comment on the Department of 

Labor’s (“Department”) proposed rule concerning the definition of the term “fiduciary” (the 

“Proposal”)2 and the corresponding proposals for new and amended prohibited transaction 

exemptions.3 The SPARK Institute supports the Department’s goal of ensuring that persons in a 

position of trust and confidence are subject to fiduciary standards when providing investment 

advice with respect to employee benefit plans (“plans”) and individual retirement accounts 

(“IRAs”). However, we remain concerned, as we were in 2010 with respect to the Department’s 

previous proposal to amend the definition of “fiduciary,”4 that the Proposal will have significant 

unintended consequences both for persons subject to the regulation and for millions of 

Americans saving for retirement. 

As explained in more detail below, we are very concerned that the Proposal is likely to create the 

following problems (among others) for plan and IRA service providers. Each of these problems 

 

1

 The SPARK Institute represents the interests of a broad-based cross section of retirement plan service providers 

and investment managers, including banks, mutual fund companies, insurance companies, third-party administrators, 

trade clearing firms, and benefits consultants. Collectively, our members serve approximately 70 million employersponsored plan participants. 

2

 80 Fed. Reg. 21,928 (Apr. 20, 2015). 

3

See, e.g., 80 Fed. Reg. 21,960 (Apr. 20, 2015); 80 Fed. Reg. 22,010 (Apr. 20, 2015). 

4

 75 Fed. Reg. 65,263 (Oct. 22, 2010). 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 2 of 32 

will ultimately have negative consequences for retirement savers’5 ability to obtain the education 

and information they need to more effectively and efficiently save for retirement: 

• The Proposal would make it difficult for service providers to: (1) provide meaningful 

assistance for small businesses, (2) provide general investment guidance to individuals, 

and (3) provide rollover and distribution information and guidance to individuals; 

• The Proposal would force service providers to scale back on several very important and 

meaningful parts of investment education that have positively engaged retirement savers; 

and 

• The Proposal affects, but does not seem to take into account, service providers’ standard 

industry practices and does not fully reflect how the market operates. Consequently, the 

Proposal will make it very difficult for plan recordkeepers and other service providers to 

respond to requests for proposals (“RFPs”) and other information requests from plan 

sponsors or IRA owners who seek a service provider or investment adviser. 

The SPARK Institute’s members, which include leading recordkeepers, third-party 

administrators, investment fund managers, and other service providers, have a critical interest in 

the Proposal because the Proposal’s conversion of certain functions and information that have 

historically been non-fiduciary in nature into the provision of “investment advice” subject to 

fiduciary standards will have a substantial effect on our members’ ability to continue providing 

many forms of their valuable services to plans and IRAs. Most of the useful services that the 

SPARK Institute’s members provide to plan fiduciaries and plan participants are not intended to 

be fiduciary in nature. The SPARK Institute’s members must keep these services non-fiduciary 

because of prohibited transaction, co-fiduciary, and other concerns, including how to truly satisfy 

ERISA’s exclusive benefit requirements6

 in the context of sales conversations. Therefore, most 

of our comments are aimed at helping the Department craft a line between fiduciary and nonfiduciary actions that is clear and that does not prevent the furnishing of valuable information 

and guidance to plan sponsors and participants. 

As we said in 2010, and continue to believe, a service provider and a plan sponsor should be 

permitted to agree upon and define, in writing, the service provider’s role, whether a fiduciary 

relationship is intended or expected, and, if it is, the scope of that fiduciary relationship. 

While there may be different considerations in the context of participants and IRA owners, it is 

fundamental that non-fiduciary service providers should be able to make their services available 

to plan sponsors without triggering fiduciary status. An inability to continue these services will 

leave plan sponsors without these services, or will require them to obtain the services at a much 

higher cost. 

Throughout this letter we have provided concrete examples of common situations where it will 

be harder for service providers to provide meaningful assistance. 

 

5

 Throughout this letter, we refer generally to plan participants and beneficiaries and IRA owners as “retirement 

savers.” 

6

 ERISA § 403(c)(1); see also ERISA § 404(a)(1) (duty of loyalty). 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 3 of 32 

I. Executive Summary

The following is a summary of the SPARK Institute’s various concerns, requests, and 

recommendations as further described below in this letter. 

Definition of “Fiduciary” – Investment Advice (Part II of this letter) 

• The inclusion of a recommendation that is “specifically directed to” an advice recipient 

could be interpreted too broadly, calling into question very standard forms of 

communications from service providers such as a subset of participants receiving general 

information about a specific issue or call center interactions in which a call center 

employee provides general information to only one person. Accordingly, we recommend 

that “specifically directed to” be removed from proposed section 2510.3-21(a)(2)(ii).

• The Department should exclude from the term “recommendation” information that is 

intended to provide general guidance and that a reasonable person would believe is not 

intended to provide individualized investment advice. Many service providers play a 

crucial role in educating and motivating participants who are increasingly responsible for 

their own retirement savings in participant-directed defined contribution plans, and 

service providers’ continued ability to provide suggestions (e.g., to diversify an account) 

to retirement savers without becoming fiduciaries is critical.

• The Department should clarify that the phrase “agreement, arrangement or 

understanding” requires a meeting of the minds. A service provider should not be 

designated a fiduciary simply because a participant decides that there was an 

“understanding” that fiduciary investment advice is or was being provided, despite the 

service provider not acting in any way that would make it reasonable to conclude that 

such an “understanding” exists (or existed).

• Because the Proposal appears to turn ordinary “hire me” conversations with plan 

sponsors into investment advice, such as where a service provider responds to an RFP 

from a prospective customer, we urge the Department to amend the Proposal so that a 

“recommendation” from a service provider that the service provider be engaged to 

provide investment advice, investment management, or valuation services (which is 

really a sales conversation) is not considered fiduciary investment advice.

• The Department should not adopt FINRA’s standards for defining what constitutes a 

“recommendation” because those standards sweep in too much activity that should be 

considered non-fiduciary and were developed specifically with broker/dealers (rather 

than plan service providers and other parties) in mind. 

• The Department should clarify the definition of “recommendation” so that it is not 

fiduciary investment advice to recommend another person to provide advice or 

investment management services, unless the person making the recommendation was 

specifically engaged to make such a recommendation for a fee. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 4 of 32 

• The Department should clarify that investment advice does not include pricing valuations 

and informational reporting activities such as the valuation of an annuity for an individual 

considering a Roth conversion who uses the valuation to determine whether to proceed 

with the conversion. 

• We ask that the Department confirm longstanding guidance that a fiduciary may limit the 

scope and time frame of the fiduciary’s duties and obligations. 

Carve-Outs (Part III of this letter) 

• The Department’s significant scaling back of what qualifies as “investment education” 

under the investment education carve-out is too severe and would result in many forms of 

very helpful information and tools no longer being made available to retirement savers. 

The Department should not amend Interpretive Bulletin 96-1 to no longer permit the 

mention of specific investments in asset allocation models because the ability to do so in 

the context of investment education has been critical in helping retirement savers 

“connect the dots” between the generic concept of asset allocation and understanding 

which of the available investment options fit in each asset allocation category. In 

addition, we urge the Department to provide that factual conversations between a service 

provider and a retirement saver regarding the pros and cons of various distribution 

options, and/or the existence of certain available products, not be considered investment 

advice.

• Unless the seller’s carve-out is extended to small plans, small plan sponsors will not 

receive the guidance they need concerning products and services available to them, which 

will discourage small employers with fewer than 100 employees (which represent nearly 

40 million workers) from offering or maintaining a retirement plan for their employees. 

Even small plan fiduciaries are able to determine whether they are being sold a product or 

service as opposed to receiving impartial investment advice, especially when provided 

with a specific written disclosure. ERISA itself makes no distinction between the duties 

and requirements of small and large plan fiduciaries. If the Department is unwilling to 

broadly expand the seller’s carve-out to small plans, we then urge the Department to 

consider requiring an additional disclosure for use specifically with small plans, making 

the carve-out available in service provider transactions for which the new 408(b)(2) 

disclosures will be required.

• The platform provider carve-out should be expanded to apply to IRAs because the carveout only provides relief for marketing a platform of investments. The assembly of a 

platform not targeted to anyone in particular should not be considered investment advice, 

including with respect to individual IRA owners, simply because the platform includes 

some investments and excludes others. 

• The selection and monitoring carve-out should not be limited to selection and monitoring 

assistance provided only in connection with a platform. In addition, the carve-out should 

be available if the service provider identifies investment alternatives based on objective 

criteria disclosed to the advice recipient (rather than “specified” by the advice recipient).
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 5 of 32 

Prohibited Transaction Exemptions (Part IV of this letter) 

• The Best Interest Contract Exemption (“BICE”) will not permit service providers to 

continue performing many important functions for plans and retirement savers if service 

providers are considered fiduciaries due to BICE’s numerous requirements. Due to our 

members’ concerns with BICE, we believe that many retirement service providers will 

not attempt to use BICE at all. Accordingly, to better accommodate the important 

functions of service providers, we ask the Department to focus on the requests and 

suggestions we have made elsewhere in this letter for changes to the scope of what 

constitutes investment advice, the definition of “recommendation,” and the scope and 

availability of the carve-outs.

• We are concerned that the BICE is neither workable, nor does it appear to be designed to 

be workable, for service provider call center conversations with participants. Thus, the 

SPARK Institute’s members are unlikely to rely on the BICE to communicate with 

participants verbally or in writing. 

Timing of Effective and Applicability Dates (Part V of this letter) 

• We urge the Department to allow 36 months from the date a final rule is published for 

such rule to be both effective and “applicable.” This suggestion is well in line with the 

time frame provided by the United Kingdom when it implemented a similarly sweeping 

rule. 

II. Definition of “Fiduciary” – Investment Advice (Proposed Rule 29 C.F.R. § 2510.3-

21(a))

Under the Proposal, 29 C.F.R. § 2510.3-21 would be revised to redefine the definition of a 

fiduciary of an employee benefit plan under the Employee Retirement Income Security Act of 

1974 (“ERISA”) due to the provision of investment advice to a plan or to the plan’s participants 

or beneficiaries. The Proposal would also apply the revised definition of a fiduciary of a plan, 

including IRAs, to section 4975 of the Internal Revenue Code (“Code”). In accordance with the 

Department’s intentions for the Proposal, the revised definition would result in a wider array of 

persons being treated as fiduciaries under ERISA and the Code than under the current rules, 

which have been in effect since 1975. 

In general, the Proposal provides that a person renders investment advice by providing 

recommendations to a plan, plan fiduciary, participant or beneficiary, or IRA owner or fiduciary, 

and either (1) the person acknowledges the fiduciary nature of the advice or (2) the person acts 

pursuant to an agreement, arrangement, or understanding with the advice recipient that the 

advice is individualized to, or specifically directed to, the recipient for consideration in making 

investment or management decisions regarding plan assets. Under the Proposal, the covered 

recommendations include those regarding securities or other property, distributions, rollovers, 

the management of securities or other property, statements regarding the value of securities or 

other property in connection with a specific transaction, and the engagement of a person who 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 6 of 32 

will receive a fee for providing advice for any of the foregoing. The Department proposes to 

define the term recommendation as 

“a communication that, based on its content, context, and presentation, 

would reasonably be viewed as a suggestion that the advice recipient 

engage in or refrain from taking a particular course of action.” 

Where such a recommendation for investment advice is provided for a fee or other 

compensation, direct or indirect, the person would be a fiduciary.7

A. The inclusion in the definition of investment advice of any recommendation 

that is “specifically directed to” the recipient will likely result in the cessation 

of many helpful forms of communication to retirement savers. 

 

A person who renders one of the Proposal’s specified categories of advice or recommendations 

“pursuant to a written or verbal agreement, arrangement, or understanding that the advice is 

individualized to, or that such advice is specifically directed to, the advice recipient” for 

consideration in making certain investment decisions with respect to a plan or IRA would be a 

fiduciary under the Proposal (emphasis added). We understand that the phrase “specifically 

directed to” was intended to address concerns with the 2010 proposal that newspaper 

advertisements and brochures might be covered. 

We are concerned, however, that the phrase “specifically directed to” is too broad. When used in 

conjunction with the Proposal’s definition of “recommendation,” many forms of written 

communications and call center interactions that are currently viewed as investment education or 

other information not constituting advice could become investment advice under the Proposal. 

The Proposal does not clarify what “specifically directed to” means, which potentially calls into 

question every interaction our members have with participants or beneficiaries that is not 

replicated to every other person in the plan. 

EXAMPLE

As part of a diversification campaign, a service provider sends a communication to all 

participants whose account holds a single fund that is not a target date fund using each 

participant’s own mailing or email address. The letter (or email) has the participant’s 

name at the top. The letter reminds the individual of the importance of diversification. 

 

7

 The Department proposes to define “fee or other compensation, direct or indirect” to mean “any fee or

compensation for the advice received by the person (or by an affiliate) from any source and any fee or compensation 

incident to the transaction in which the investment advice has been rendered or will be rendered.” Proposed rule, 29 

C.F.R. § 2510.3-21(f)(6) (80 Fed. Reg. 21,960). Some SPARK members expressed concern that it is not clear how 

broadly this definition sweeps, particularly where a service provider receiving some compensation for non-fiduciary 

services makes a recommendation (or has an employee make a recommendation) that triggers the Department’s test, 

but is not being compensated directly or indirectly for that “advice” – that is, there is no incremental fee or other 

compensation for the “advice.” Most SPARK members are reading the definition to be very broad, which results in 

a number of concerns expressed in our comment letter. We recommend the Department clarify the application of 

this definition. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 7 of 32 

The letter also provides a list of all the target date fund (“TDF”) options available under 

the participant’s plan, and explains that a TDF is designed to provide diversification and 

age-appropriate allocations within a single fund so that it may be appropriate for 

someone looking for a simple way to diversify their account with a “one fund” investment 

approach. This communication appears “specifically directed to” the participant. 

EXAMPLE

A plan fiduciary is concerned that some participants are heavily invested in employer 

stock and directs the service provider to send letters to participants with more than 20% 

of their account in employer stock. The letter explains the benefits of diversification 

similar to the statement required by ERISA. The letter is intended to be viewed as a 

“suggestion” the participant take a course of action (to diversify), and would be viewed 

as “specifically directed to” the participant. 

EXAMPLE

A participant calls the service provider’s call center to discuss loan options. The call 

center employee uses a script with generic information about the potential implications 

of taking a loan, including lost retirement savings and tax consequences upon default. 

The call center employee does not advise the participant on what is right for that 

participant’s circumstances, but because the participant is the only person on the phone 

listening to the call center employee, the conversation appears “specifically directed to” 

the participant. 

As written, the Proposal would lead many service providers to stop providing to retirement 

savers forms of communication that have been carefully developed over the years to provide 

helpful and timely information, encourage general diversification and increased retirement 

savings, and provide basic investment education. We understand that the Department has 

concerns with the practice described as the advertisement of one-on-one advice that an adviser 

disclaims in fine print as not being fiduciary advice. However, we urge the Department to 

protect routine letters addressed to a particular person and the many other forms of 

communication that are targeted to a particular issue (rather than to a particular person). 

Finally, a product provider should be able to explain the attributes of its products without 

becoming a fiduciary. 

 EXAMPLE

A participant owns an annuity or other investment that includes a guaranteed minimum 

withdrawal benefit (GMWB). The participant attempts to make an “excess” withdrawal, 

which would reduce the value of the GMWB. The insurance company or other provider 

should be able to explain the consequences of making the withdrawal to the participant, 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 8 of 32 

regardless of whether first asked by the participant, without engaging in the provision of 

fiduciary investment advice, even if its explanation of the consequences would lead a 

participant to (appropriately) seriously reconsider the decision. 

Accordingly, we recommend that the Department remove the phrase “or that such advice is 

specifically directed to” from proposed section 2510.3-21(a)(2)(ii).8 

B. The Department should amend the Proposal to exclude recommendations 

that a reasonable person would not believe are intended to be individually 

tailored to the recipient. 

A fundamental concern that SPARK Institute members have with the Proposal is that the 

Proposal calls into question a variety of communications that service providers might have with 

participants that would not reasonably be viewed as an undertaking to provide investment advice. 

Participants generally receive two kinds of information from plan sponsors and service 

providers. The first category is generic plan-related information, much of which is required by 

law. This includes the Summary Plan Description and the annual fee and investment disclosure. 

These documents are important, but they are not enough to motivate participants to save in the 

plan, diversify their accounts, and preserve plan savings for retirement. All other 

communications (some of which squarely fit into the example of “education” under current law, 

and others that are similar to education) are actually intended to provide guidance. Because of 

the responsibility placed on participants under participant-directed defined contribution plans, 

participants must be educated and motivated, and thus many service provider communications 

are “suggestions” that a participant either take an action (e.g., diversify) or not take an action 

(e.g., keep savings preserved in a plan or IRA). 

EXAMPLE

A representative of a plan sponsor’s 401(k) service provider hosts an educational 

workshop over the lunch hour at the employer’s work site to help employees understand 

their 401(k) plan and make informed choices. An employee attending the workshop 

raises his hand and says “I’m trying to decide if I should use the default investment or 

manage my account myself.” The representative responds, “I can’t tell you what to do 

or provide investment advice, but here are a few things that we tell employees to keep 

in mind. First, the default investment is intended as an all-in investment because it is 

diversified, so if you use it, consider putting all of your account in the default. Second, if 

you manage your account on your own, be careful not to put too many of your eggs in 

one basket and think about the advantages of diversification in long-term investing. For 

example, investing all of your account in the plan’s international equity fund has 

considerable risk given the lack of diversification.” This is an incredibly helpful 

conversation that goes on every day, and the employee should not reasonably view the 

information and guidance provided as an undertaking to provide fiduciary investment 

 

8

 If the Department elects to retain the “specifically directed to” language, the Department needs to provide more 

focused guidance distinguishing routine communications like those described in Part II.A. of this letter. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 9 of 32 

advice. Further, if this conversation is deemed fiduciary in nature, the plan sponsor will 

not permit educational workshops such as this to occur. 

We do not think the Department intends to cover communications that a reasonable person 

would not understand to be impartial or trusted investment advice. Thus, we recommend that the 

Department build into section 2510.3-21(a)(2)(ii) a requirement that the advice be provided 

under circumstances that a “reasonable person would understand to be individualized advice that 

may be relied upon in making investment or investment management decisions.”9 

C. The Department should clarify that the phrase “agreement, arrangement or 

understanding” requires a meeting of the minds. 

The Department has expressed concern that the current regulation’s requirement for a “mutual” 

agreement, arrangement, or understanding can allow a person who acts in all ways like a 

fiduciary to escape fiduciary status through a boilerplate disclosure. The Department deleted the 

word “mutual” from the definition, but retained the phrase “agreement, arrangement or 

understanding.” We believe that this remaining phrase continues to require a bilateral element – 

after all, an “agreement” or “arrangement” requires two parties to agree, and the term 

“understanding” appears in this context to mean an “understanding” between the advice provider 

and the advice recipient to provide advice that will be individualized and that will be relied upon 

in making investment decisions. To illustrate, we believe that unsolicited communications 

should never be considered advice because they would not be provided to the recipient pursuant 

to an agreement, arrangement, or understanding. 

If a participant can simply decide that he or she has an “understanding” that fiduciary investment 

advice will be or, after the fact, was provided – despite the service provider not acting in any way 

to make the existence of an “understanding” reasonable – then a service provider can never be 

confident that its actions have not triggered fiduciary status. Thus, we ask you to confirm that 

there must be objective evidence that a meeting of the minds demonstrates an agreement, 

arrangement, or understanding between the advice provider and the advice recipient. We 

appreciate that this should not be judged solely on a single disclosure but on all of the 

surrounding communications. 

It should not be enough for a participant to merely believe that fiduciary investment advice is 

being provided, if that belief is not reasonable under the circumstances. 

D. The Department should amend or clarify the Proposal so that “hire me” 

conversations are not a fiduciary act. 

Proposed rule 29 C.F.R. § 2510.3-21(a)(1)(iv) would result in a recommendation of a person 

who would receive compensation for providing investment advice, or a recommendation 

 

9

 This standard used to determine what a “reasonable person would understand” could be coupled with factors that 

should be considered or are relevant, such as the degree to which advice is individualized, any disclosures provided, 

and the nature of the relationship, with no one factor being determinative. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 10 of 32 

regarding the “management” of plan assets, as being investment advice itself. There has been 

considerable confusion over whether this provision would subject a service provider to fiduciary 

status simply for promoting its own investment advice, investment management, or valuation 

services (or those of an affiliate). For many of our members, this may occur where a service 

provider responds to a request for proposal (“RFP”). 

EXAMPLE

A plan issues an RFP for an investment advice provider. The RFP requires a narrative 

asking respondents to explain “why the plan should hire your firm.” An investment 

advice provider responds to the RFP and explains that the provider believes it has an 

excellent service that would meet the plan’s needs. The advice service does not involve 

differential compensation; any fees received from investments recommended will offset 

the fee pursuant to Department guidance.10

If this example results in the service provider being treated as a fiduciary, then any hiring of a 

fiduciary is a prohibited transaction for that fiduciary. We do not think this was the intended 

result, but the regulation as proposed creates this problem. Such an interpretation would be 

inconsistent with the Department’s longstanding and sensible interpretation of section 406(b)(1) 

of ERISA. In fact, an example in the Department’s 408(b)(2) regulation involves exactly this 

situation: 

E, an employer whose employees are covered by plan P, is a fiduciary with 

respect to P. A, who is not a party in interest with respect to P, persuades E that 

the plan needs the services of a professional investment adviser and that A should 

be hired to provide the investment advice. Accordingly, E causes P to hire A to 

provide investment advice of the type which makes A a fiduciary under § 2510.3-

21(c)(1)(ii)(B). Prior to the expiration of A's first contract with P, A persuades E 

to cause P to renew A's contract with P to provide the same services for additional 

fees in view of the increased costs in providing such services. During the period 

of A's second contract, A provides additional investment advice services for 

which no additional charge is made. Prior to the expiration of A's second 

contract, A persuades E to cause P to renew his contract for additional fees in 

view of the additional services A is providing. A has not engaged in an act 

described in section 406(b)(1) of the Act, because A has not used any of the 

authority, control or responsibility which makes A a fiduciary (the provision of 

investment advice) to cause the plan to pay additional fees for A's services.11

Accordingly, we recommend that the Department amend the Proposal to provide that a person

shall not be considered a fiduciary solely because the person recommended itself or an 

 

10 See Advisory Opinion 97-15A (May 22, 1997) (Frost Nat’l Bank). 

11 C.F.R. § 2550.408b-2(f), example 4. This example existed in the 408(b)(2) regulation before the Department 

amended it to reflect the new disclosure requirements. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 11 of 32 

affiliate to provide the services described in section 3(21) of ERISA or section (a)(1) of the 

[proposed] regulation. 

If the Department does not make this change, it is possible that there is no construct under which 

a “hire me” discussion could occur with a small plan sponsor. That is, the seller’s carve-out may 

be available for offering services to large plans (although the seller’s carve-out does not 

explicitly refer to the provision of “services”). If the seller’s carve-out were expanded beyond 

large plans (which we recommend and as further discussed below), this issue may be resolved. 

If the Department decides to make “hire me” discussions subject to fiduciary status – which we 

believe is inappropriate and contrary to ERISA and DOL regulations – then the Department 

needs to address the prohibited transaction concerns. A completely new exemption would need 

to be proposed and comments sought. The BICE is not designed for this situation, as it is 

designed for advice recommendations to individuals generating differential compensation. 

E. The Department should not adopt FINRA’s standards for defining what 

constitutes a “recommendation” because that is too low a bar and is not 

appropriate for ERISA’s fiduciary line.

Noting that most communications must constitute a “recommendation” to fall within the scope of 

fiduciary advice,12 the Department commented in the Proposal that it believes FINRA guidance 

regarding the evaluation of whether a particular communication could be viewed as a 

recommendation would provide useful standards and guideposts for distinguishing investment 

education from investment advice under ERISA.13 In this regard, the Department requested 

comments on whether it should adopt some or all of the standards developed by FINRA in 

defining communications that rise to the level of a recommendation for purposes of 

distinguishing between investment education and investment advice. For example, FINRA 

Policy Statement 01-23 provides guidelines to assist brokers in evaluating whether a 

communication could be viewed as a recommendation, which would in turn trigger additional 

requirements to help ensure the suitability of the recommendation for FINRA purposes. 

We do not think that it is appropriate to adopt a broad definition of “recommendation” based on 

FINRA rules. FINRA is a separate regulatory body that has developed guidance designed 

specifically with broker/dealers and its own penalty system in mind. FINRA’s definition of 

recommendation – although appropriate for FINRA’s purposes in regulating those who sell 

securities – is too low a bar for purposes of the Proposal, making too many communications 

fiduciary in nature. Merely defining a recommendation as a “suggestion” that the advice 

recipient take (or not take) a certain action could be read very expansively; rather, a definition of 

recommendation that involves the “advocacy” of a specific act, would be a more appropriate – 

and workable – definition for purposes of the Proposal. 

 

12 See proposed rule, 29 C.F.R. § 2510.3-21(a)(1)(i), (ii), (iv) (80 Fed. Reg. 21,957). 

13 See 80 Fed. Reg. 21,938. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 12 of 32 

Many of the concerns we lay out in this letter are created, in part, because the definition of 

“recommendation” is not well suited to the kinds of communications typical in a 401(k) plan. To 

illustrate: When the Department finalized its 404a-5 regulations requiring a fee and investment 

disclosure, it became apparent that even though the disclosure is required to be furnished by the 

plan administrator, any FINRA-regulated entity could be subject to FINRA rules if it assisted in 

the preparation of the disclosure. Accordingly, even a disclosure required by the Department 

and not intended to be a recommendation could be subject to FINRA’s rules. The salient point is 

that FINRA’s rules deliberately set a low bar for what constitutes a “recommendation.” We 

disagree that the Department should adopt such a low bar. Instead, the Department should 

develop guidance that is narrower than the FINRA guidance regarding what constitutes a 

“recommendation.” 

The adoption of FINRA’s standards would result in a wide variety of persons not involved in the 

selling of securities (e.g., recordkeepers and other third-party administrators) becoming subject 

to standards that were not developed with them in mind. This would be very troublesome in the 

context of the Proposal, where the consequences for committing a prohibited transaction are 

draconian. 

In addition, we are concerned that whenever FINRA makes future changes to its guidance 

regarding what constitutes a “recommendation,” it will do so only with broker/dealers in mind 

(as would be expected), and that FINRA would not consider the impact of any changes on 

service providers and other entities that are subject to its guidance only due to the Department’s 

adoption of FINRA guidance for purposes of the fiduciary rule. To our knowledge, this sort of 

tying one regulatory line to the guidance from another regulator with a completely different 

purpose is unprecedented. It would not be FINRA’s job to monitor or understand the impact of 

any changes to its guidance on parties other than those whom it regulates for its own purposes. 

Allowing an external entity to alter the definition of “recommendation” would be very 

problematic, especially because a service provider or other non-broker/dealer entity would not be 

able to seek a fix from FINRA. 

F. The Department should clarify that it is not fiduciary investment advice to 

recommend another person to provide advice or investment management 

services, unless the person was specifically engaged to make such a 

recommendation for a fee or other compensation. 

As described above, the provision of investment or investment management recommendations 

would result in the provider of the recommendation being treated as a fiduciary in certain cases. 

One of the categories of investment advice under the Proposal, which is provided for in proposed 

rule 29 C.F.R. § 2510.3-21(a)(1)(iv), is, “in exchange for a fee or other compensation, whether 

direct or indirect”: 

“[a] recommendation of a person who is also going to receive a fee or 

other compensation for providing any of the types of advice described in 

paragraphs (i) through (iii) [such as a recommendation to acquire, hold, 

dispose of, or exchange securities or other property, a recommendation to 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 13 of 32 

take a distribution of benefits or how to invest property rolled over from a 

plan or IRA, or a recommendation as to the management of investments or 

other property]....” 

It is common practice for SPARK Institute members to coordinate their technology and other 

systems with independent third party fiduciaries who themselves willingly take on the role of a 

fiduciary (as defined in section 3(21) of ERISA) with respect to a plan. Some of our service 

provider members also offer investment advisory services through an affiliated investment 

adviser. 

Based on the provisions provided above, our members are concerned that their affiliation or even 

mere coordination with an investment adviser would in many common situations result in the 

service provider being found to have provided investment advice. 

EXAMPLE

A plan sponsor seeking investment advisory services asks its service provider (who has 

not been retained to provide investment advice) if it does business with any investment 

advisers. In response, the service provider provides the names of those investment 

advisers with whom its systems are already interfaced and with whom the service 

provider has an existing business relationship. The service provider does not intend for 

the provision of such names as being a recommendation, but under the Proposal this 

action may fall within (a)(1)(iv) and be viewed as a suggestion that the plan sponsor 

take action to engage the services of one of the named investment advisers. 

The Department appears to be concerned about a scenario that is different from the example 

above. The Department appears to be concerned about a plan consultant that is hired to provide 

recommendations about investment managers and investment advisers, and believes those 

services should be fiduciary in nature.14 On the other hand, if a service provider who has not 

been engaged to provide these consulting services makes a recommendation regarding an 

affiliated or third-party advice service, the service provider has not used any authority, control, 

or responsibility that would make the provider a fiduciary. 

Both advice services and managed account services are often made available by service 

providers as an add-on service for those plan sponsors that want to offer such services to their 

participants. These advice services would satisfy current law rules – the fee could be level, 

provided under a SunAmerica computer model, or comply with another exemption like ERISA 

section 408(b)(14) or PTE 77-4 – and would be fiduciary in nature. The plan sponsor would 

receive 408(b)(2) and/or 408(g) disclosures in connection with electing the add-on service. 

 

14 We do not necessarily agree that recommending another fiduciary is “investment advice” as Congress could have 

possibly meant that term for the simple reason that it is not “advice” about an “investment.” We understand that the 

Department disagrees, but the point we make in this section is that, if such a recommendation is investment advice, 

it should only apply where someone has been specifically engaged to provide that recommendation for a fee or other 

compensation. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 14 of 32 

Making these services available to plan sponsors, in coordination with other non-advisory 

services, enables plan sponsors to streamline the services needed to implement and manage their 

plans. The Proposal in its current form is problematic because if a service provider cannot 

market these add-on services without becoming a fiduciary, the services may not be offered. 

Accordingly, we recommend that the Department clarify that it is not fiduciary investment 

advice to recommend another person to provide advice or investment management services, 

unless the person was specifically engaged to make such a recommendation for a separate fee. 

Service providers should be able to communicate their offerings and capabilities to the market, 

including statements as to the third party(ies) and/or affiliate(s) with which the service provider 

has the ability to interface, without such a factual communication being a “recommendation.”15 

If the final rule provides that such actions are investment advice under the Proposal, plan 

sponsors and retirement savers risk losing access to financial advisers and managed account 

services. 

We emphasize once again that any investment advisers or managed account providers that are 

engaged by a plan already accept fiduciary status for the fiduciary activities inherent in their 

services – meaning the plan and its participants are fully protected. 

G. The Department should clarify that investment advice does not include 

pricing valuations and informational reporting activities. 

Under the Proposal, investment advice could include “[a]n appraisal, fairness opinion, or similar 

statement whether verbal or written concerning the value of securities or other property if 

provided in connection with a specific transaction or transactions involving the acquisition, 

disposition, or exchange, or such securities or other property by the plan or IRA.”16 We 

understand that the Department’s primary concern behind this provision is a plan’s purchase or 

sale of nontraditional assets like real estate where the plan fiduciary receives, for example, an 

appraisal of the asset’s value. We support a definition of investment advice where such an 

appraisal of real estate or other nontraditional assets would be fiduciary in nature. We are 

concerned, however, that the term “transaction” will be interpreted broadly and that the Proposal 

would sweep in routine valuations that service providers perform for plans and retirement savers. 

EXAMPLE

An individual who owns a traditional IRA annuity is considering whether to convert the 

IRA to a Roth IRA. The owner asks the insurance company for the value of his annuity 

because he would like to estimate the tax consequences of a conversion. The amount 

 

15 The requested change is needed because without it the implication will be that a service provider has to offer more 

than one option in order to be able to offer any of these “add-on” services. 

16 Proposed rule, 29 C.F.R. § 2510.3-21(a)(1)(iii) (80 Fed. Reg. 21,957). 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 15 of 32 

of taxable income is based on the fair market value of the annuity on the date of 

conversion.17 The insurance company’s provision of the annuity valuation would be 

investment advice under the Proposal because a Roth conversion is a “transaction.” 

EXAMPLE

A 401(k) service provider’s platform offers a mix of registered mutual funds, collective 

trusts, and separate accounts. Separate accounts, when offered, are investments 

similar to the mutual funds and collective trusts offered to 401(k) plans, but are 

designed for a plan large enough to justify separate account pricing; otherwise a 

separate account operates like a collective trust with just one plan investor. As is now 

standard in the market, the service provider offers asset reallocation on each business 

day. Accordingly, the service provider’s trust company affiliate “strikes” a daily net asset 

value (NAV) for collective trusts and separate accounts, using procedures similar to 

those used for registered mutual funds. This NAV is reported daily by the service 

provider to plan fiduciaries and participants, and plan transactions are based on the 

NAV reported. While any asset values reported to the collective trust are covered by 

the carve-out, identical reporting to the separate account appears to be fiduciary in 

nature, increasing the cost of the separate account. In addition, the reporting of the 

NAV itself could be viewed as fiduciary investment advice. 

EXAMPLE

A plan’s assets are invested in insurance company separate accounts. The insurance 

company provides the plan’s fiduciaries with monthly asset valuations. The asset 

valuation reports are intended for informational purposes and are used by plan 

fiduciaries for benchmarking purposes. If the plan fiduciaries engage in a transaction 

that is connected to the asset valuation reports, then the insurance company would be 

treated as a fiduciary due to its provision of the informational reports. 

We request that the Department clarify that investment advice does not include pricing 

valuations and informational reporting activities such as those in the examples above. We 

appreciate that the Department provided a carve-out in the Proposal to except certain valuations 

from being treated as investment advice, but the carve-out is too narrow to cover the valuations 

described above. As an alternative, the Department could broaden the financial reports and 

valuation carve-out to exempt these types of transactions from being treated as fiduciary in 

nature. 

Finally, while we appreciate and support the carve-out in section (b)(5)(ii) of the proposed 

regulation for appraisals, fairness opinions, or statement of values provided to an investment 

fund with multiple unaffiliated plan investors, we believe this carve-out should not be limited to 

 

17 26 C.F.R. § 1.408A-4, Q&A-14. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 16 of 32 

funds that hold the assets of more than one unaffiliated plan. Otherwise, there is an artificial 

incentive to pool plans together when the economics otherwise justify a separate account. 

These are significant and important issues. If the Department cannot address them fully, the 

Department should defer all valuation issues – not just ESOPs – to a separate rulemaking. 

H. Clarification is requested on the role and scope of what it means to be a 

“fiduciary” under the Proposal. 

As described above, the Proposal would expand the definition of the term “fiduciary” such that 

more persons would become subject to ERISA’s fiduciary standards than under the current 

regulations. At the same time, fiduciaries relying on BICE would be prohibited under BICE 

from disclaiming or otherwise limiting the investment advice fiduciary’s liability. 

Under current law, a fiduciary is generally only subject to fiduciary standards to the extent the 

fiduciary has authority and only during the time period while the fiduciary exercises its fiduciary 

obligation. However, between the Proposal’s expansion of who is considered a fiduciary and 

BICE’s limitation on a fiduciary’s ability to limit its liability, we are unsure whether 

longstanding understandings of the scope of fiduciary status continue to apply. We therefore 

request that the Department confirm that its long-standing interpretations regarding the scope of 

fiduciary duties and fiduciaries’ ability to allocate those duties continue to apply under the 

Proposal. We recommend the following clarifications:

18

•If a person becomes a fiduciary because of a recommendation, fiduciary status relates 

only with respect to the recommendation triggering fiduciary status, and not for any 

other past, present, or future communications that do not meet the test for fiduciary 

status. 

•Fiduciary status does not automatically require a duty to monitor the advice provided, 

unless the fiduciary investment adviser is so engaged and agrees to ongoing 

monitoring. 

•Fiduciary status due to the provision of investment advice only applies to the 

individual(s) meeting the definition of fiduciary and does not create fiduciary status for 

an individual’s employer unless that employer affirmatively accepts fiduciary status. 

For example, inadvertent fiduciary status arising from a call center employee who 

crosses the line from education to advice does not result in the call center employee’s 

employer being treated as an investment advice fiduciary. 

 

18 In a related matter, we appreciate the Department’s comments in the preamble that the Proposal clarifies that 

attorneys, accountants, and actuaries would not be treated as fiduciaries merely because they provide certain 

professional assistance to a plan in connection with a particular investment transaction, and we agree that this is the 

correct result. However, the Proposal’s proposed amendments to 29 C.F.R. § 2510.3-21 do not appear to make this 

clarification. We recommend that the Department incorporate the intended clarification on this matter in the final 

rule. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 17 of 32 

•The BICE’s prohibition on disclaimers and liability limits does not prohibit a fiduciary 

from limiting the scope of the advice that will be given. For example, a fiduciary 

relying on BICE could limit its advice to one particular investment, one asset class, or 

to a single recommendation. 

•If a person provides investment advice, but the recipient does not act reasonably promptly 

on that advice, both fiduciary status and the requirements of the BICE end. 

•The Department should clarify that, due to the inadvertent fiduciaries that will be created 

by the Proposal, the Proposal will not require every fiduciary associated with the plan 

to continually monitor all others to avoid co-fiduciary liability under ERISA section 

405. (The Department also needs to ensure that its economic analysis takes into 

account the costs of co-fiduciary liability, including the cost of insurance, because of 

the vast number of new fiduciaries that will be created.) 

The Department has addressed these questions to some extent in section (c) of the Proposal, but 

section (c) appears to relate only to particular assets and not the scope and timing of fiduciary 

obligations. We think all of these clarifications are simply expressions of ERISA’s rule that a 

fiduciary’s duties apply only “to the extent” of the fiduciary’s discretion or authority. The 

Department should clarify these duties. 

III. Carve-Outs – Investment Advice (Proposed Rule 29 C.F.R. § 2510.3-21(b))

Under the Proposal, 29 C.F.R. § 2510.3-21(b) provides several carve-outs under which the 

rendering of advice or other communications in conformance with one of the carve-outs will not 

cause the person who renders the advice to be treated as an investment advice fiduciary.19 The 

general categories of carve-outs offered under the Proposal consist of (1) counterparties to the 

plan (i.e., a “seller’s carve-out”), (2) employees of the plan sponsor, (3) platform providers, (4) 

selection and monitoring assistance, (5) financial reports and valuations, and (6) investment 

education. Our comments and suggestions regarding the carve-outs are set forth below. 

A. The proposed investment education carve-out’s narrowing of what 

constitutes investment education will cause service providers to cease 

providing several forms of helpful support and information to plan sponsors, 

participants, and IRA owners. 

EXAMPLE

One SPARK Institute member, a major provider of defined contribution services, 

estimates it processes over 2.1 million calls per year regarding asset allocation issues, 

loans, distributions, enrollments, or rollovers. The member estimates that the Proposal 

would affect approximately 30% of these calls, meaning less information would be 

provided during nearly 1/3 of the calls the member handles. Another SPARK Institute 

 

19 If a person represents or acknowledges that he or she is acting as an ERISA fiduciary with respect to the 

investment advice provided, then the carve-outs do not apply. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 18 of 32 

member, also a major provider of defined contribution services, estimates that it 

processes over 2.3 million such calls and that the Proposal would potentially affect 

approximately 55% of these calls. 

 1. References to specific investments

Under the Proposal’s investment education carve-out, the ability to mention a specific 

investment available under a plan or IRA would be severely curtailed. The proposed carve-out 

provides that the following information and materials would not constitute investment education 

and could therefore subject the provider of the information to fiduciary treatment: (1) plan 

information that references the appropriateness of an individual investment alternative; (2) 

general financial, investment, and retirement information that addresses specific investment 

products available; and (3) asset allocation models that include or even identify any specific 

investment product or specific alternative available under the plan or IRA. This is a significant 

narrowing of the Department’s Interpretive Bulletin 96-1 (“IB 96-1”),20 which is one of the 

Department’s most successful pieces of guidance. 

The SPARK Institute’s members are very concerned about their inability under the Proposal to 

continue many beneficial forms of communication to plan sponsors and retirement savers 

without crossing the line into providing investment advice. This concern is especially acute in 

the context of participants in self-directed plans and the service provider’s ability to provide 

information critical to participants’ ability to make decisions with respect to their investments. 

IB 96-1 currently permits the use of asset allocation models that reference specific investments 

available under the plan or IRA as long as the model is accompanied by the specified disclosure 

statement. The Department expressed concern in the Proposal that the ability to refer to specific 

investments in an asset allocation model can be used to “steer recipients to particular 

investments” without adequate protections against abuse. The Department provided no 

evidence, however, that IB 96-1 is being used inappropriately today. As discussed below, IB 96-

1 is working particularly well within asset allocation models and other education provided to 

participants where the plan fiduciary has already selected the menu of investments from which 

participants may choose. The mere mention of a fund that has been selected by the plan 

fiduciary should not be a fiduciary act. 

Within the parameters of IB 96-1 as it exists today, service providers are able to provide very 

helpful information to retirement savers in the form of asset allocation models, educational 

documents, and interactive online tools that include references to the specific investment options 

available under the plan or IRA. This factual information serves a critical role in helping such 

individuals connect the dots between general investing principles and understanding which 

specific investments may be used to put that information into play for their particular situations. 

Without this information readily available, all but the most sophisticated retirement savers will 

be challenged in knowing how to select from what may be dozens or hundreds of investment 

options made available to them. As described below, in many instances, other materials such as 

 

20 29 C.F.R. § 2509.96-1. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 19 of 32 

a comparative chart or other fund materials will identify each available investment option by 

asset class. It would be extremely burdensome for retirement savers to have to refer to those 

materials versus simply being provided with a list of some or all of the available funds by asset 

allocation in a tool. Unfortunately, difficulties such as this are one of the primary reasons why 

many individuals are not engaged and may not even participate in a plan for which they are 

eligible. The Proposal will make it very difficult for employers or their service providers to 

provide any meaningful investment tools to perform the same function of helping individuals 

connect the dots that asset allocation model tools may perform today. 

EXAMPLE

A plan offers an interactive web tool that allows a participant to enter general 

information about her age and risk tolerance and then generates an asset allocation 

model based on generally accepted investment theories. The tool follows the 

requirements of IB 96-1. Where an asset class is represented among the plan’s 

investments, the tool references one or more of the investments within that particular 

asset class. The tool is designed to make it very easy for the participant to move from 

education to implement the education provided. If this is now considered a fiduciary act, 

that information will likely no longer be provided.

Even if a service provider is careful not to recommend particular investments, the Department’s 

rules require that there be no recommendations “standing alone or in combination with other 

materials.” This makes it difficult to provide effective information to participants at the time it 

may be most needed without triggering fiduciary status. 

EXAMPLE

The enrollment packet for a 401(k) plan provides basic asset allocation models to help 

educate a participant about the value of proper asset allocation. The materials include 

three pie charts that might be appropriate for a “conservative,” “moderate,” or 

“aggressive” investor, referencing particular asset classes. As required by Department 

rules, the same enrollment packet includes the fee and investment disclosure,21 which 

identifies each investment by its asset class. The educational materials “in conjunction 

with” the required fee and investment disclosure appear to make a recommendation as 

to a specific investment. Separating the items to avoid fiduciary entanglements may 

result in higher printing and mailing costs that would likely be passed along to plan 

participants. 

We believe that IB 96-1, with the helpful additions in the Proposal regarding distribution 

education, should be retained in its entirety. IB 96-1 in its current form is working well and 

appropriately balances the need to reference specific investment option information to retirement 

savers without such information automatically being found to be investment advice. This is 

particularly true for service providers providing asset allocation models and other education to 

 

21 29 C.F.R. § 2550.404a-5. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 20 of 32 

participants where the plan fiduciary has already selected the menu of investments from which 

the participants may choose. Further, many asset allocation tools currently in use allow the plan 

fiduciary to select the investment used within the standard model(s) in place for its participants. 

In these situations there is no evidence that service providers are abusing IB 96-1 as a subterfuge 

for selling a particular investment. The service provider is simply educating participants on, or 

applying the plan fiduciary-selected investments to, each category and making it easier for 

participants to implement the education. IB 96-1 provides plan fiduciaries valuable protections 

that should be retained and should continue to allow them to direct the use of these asset 

allocation tools by their hired service providers, without assuming additional fiduciary liability 

for themselves as a provider of investment advice or assigning fiduciary status to the provider of 

the tools. 

The Proposal’s restrictions on the ability for service providers to mention a specific investment 

option without such communication crossing the line into investment advice seem to create a 

conflict with the requirements that regulatory notices discussing specific investments be 

provided in certain situations. Although we do not believe that the Proposal was intended to 

create uncertainties with respect to such notices, the fact that regulatory notices could be found to 

constitute investment advice is a clear example of the Proposal’s overly broad definition of 

investment advice and the effects of narrowing what is considered investment education. 

Examples of such regulatory notices include QDIA notices (a required education document that 

mentions specific investments) and the mapping notice under ERISA section 404(c)(4) (which is 

required to identify investments). 

EXAMPLE

The Proposal has been finalized as proposed, and IB 96-1 has been modified. A plan 

offers an educational session to help employees understand basic investment 

principles. The presentation explains the importance for those with a long time horizon 

of investing an appropriate amount of their account in equities. An employee 

approaches the presenter after the conclusion of the presentation and says, “Okay, I’m 

going to move some of my account balance out of the money market fund and into an 

equity fund, now that you’ve educated me. Which funds in the plan are equity funds?” 

The presenter refuses to answer. 

We urge the Department not to limit IB 96-1’s parameters regarding what constitutes investment 

education, especially regarding the ability of a service provider to provide asset allocation 

models that reference specific investments that are selected (and monitored) by the plan fiduciary 

for inclusion under the plan’s limited line-up. 

 2. Distribution and rollover information

Under the Proposal’s investment education carve-out, certain plan information, including the 

impact of preretirement withdrawals on retirement income or varying forms of distributions 

available (including their advantages, disadvantages, and risks), would constitute investment 

education rather than investment advice as long as such information does not reference the 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 21 of 32 

“appropriateness” of any individual benefit distribution option for the plan, IRA, or retirement 

saver. 

Our members are very concerned about their ability to determine the difference between 

providing information on the advantages, disadvantages, and risks of the distribution options 

available to a person (including rollover options), which would fit within the carve-out, and 

information on the appropriateness of such distribution options, which would disqualify the 

information from fitting within the carve-out. Consideration of the advantages and 

disadvantages of a particular course of action leads to a determination of the appropriateness of 

such action, making it difficult to understand why the carve-out would be available to 

information regarding the former but not the latter. 

Even if our members could find comfort in understanding what the difference is, they would be 

further challenged by having to train hundreds or thousands of call center employees on where 

the line is and hope that a front-line employee does not inadvertently cross the line into providing 

investment advice. Without a clear line that can be easily communicated and implemented with 

respect to all service provider employees that interact with retirement savers, our members will 

have little choice but to cease providing helpful information to retirement savers regarding 

distributions and rollovers. This response by service providers will ultimately harm participants 

and IRA owners who will no longer receive this very beneficial information and, as a result, may 

withdraw money or choose a distribution form that will harm their retirement outcome simply 

because they were unaware of its implications and/or of other options that were available to 

them. 

EXAMPLE

A participant who is terminating employment calls the plan’s call center to discuss her 

options. The plan includes the right to elect an annuity distribution. The participant 

says “I really want to have guaranteed income for my life, so what would be good for 

me?” The call center representative has been trained to only discuss the “pros” and 

“cons” of the annuity distribution, but the list of “pros” has five items (including the 

availability of guaranteed income) and the “cons” has only two items. The 

representative also explains to the participant how the specific annuity works, and the 

features of any riders attached to the annuity that provide unique benefits. The 

participant ends the call with the impression that the conversation is a suggestion to 

elect the annuity. This call center interaction presents a problem because it is unclear 

whether the “pros” and “cons” would be considered advantages and disadvantages of 

electing an annuity distribution, or a discussion concerning the “appropriateness” of 

doing so. The availability of the investment education carve-out depends on which side 

of the line this conversation falls. 

EXAMPLE

A participant who is terminating employment calls the plan’s call center to discuss her 

options. The call center employee has been trained to help a participant understand the 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 22 of 32 

downsides of taking a distribution and not rolling it over, including the significant tax 

penalty and loss of future retirement income. The call center employee has also been 

trained not to appear to favor leaving the money in the plan versus conducting an IRA 

rollover. Similar to the example above, it is unclear whether the call center employee is 

covered by the investment education carve-out because the Proposal does not explain 

the difference between “disadvantages” and “appropriateness” in this situation. 

Retirement savers’ decisions regarding whether to take a distribution from a plan or IRA and the 

form of distribution to take are some of the most critical decisions that such individuals can 

make. While the current Proposal allows a discussion of the “advantages, disadvantages, and 

risk” of various forms of distribution, the Proposal also prohibits information or materials that 

address “distribution options available” to participants and prohibits any information regarding 

the “appropriateness” of any distribution option (including any discussion of the appropriateness 

of not taking a distribution).22 This suggests that an educational program or a call center 

representative can discuss the pros and cons of theoretical distribution options but not the pros 

and cons of the actual distribution options available in the plan. For many participants without 

access to this information elsewhere, especially those with lower incomes who could not afford, 

or would choose not to spend money, to procure this general information via advisory fees, the 

ability to receive necessary information regarding distribution options from their plan’s service 

provider is especially beneficial. We also feel strongly that is it unreasonable to believe that 

terminated employees will simply leave their money in a former employer’s plan, absent solid 

information regarding their options. There are often many reasons that terminated employees 

want to fully disconnect from a former employer, and we believe the more likely result of the 

Proposal will be increased leakage from retirement plans and IRAs. 

The ability to provide accurate and helpful information on distribution options is critical. The 

term “investment advice” refers to counseling a participant regarding the investment of his or her 

plan account (e.g., recommending a specific asset allocation among funds available in the plan). 

Discussion of specific plan distribution options, designated investment alternative information 

required under Regulation § 2550.404a-5, and general information and materials regarding 

specific alternatives or services available outside the plan is not investment advice. Rather, a 

discussion of such features and options available to a participant serves to educate a participant 

about his or her rights under his or her particular plan and federal law. 

For example, Texas has recently experienced significant destruction due to flooding. As a result, 

President Obama declared much of Texas a national disaster zone. This declaration is significant 

for retirement plan purposes because it allows participants to make expedited loan and hardship 

distribution requests. If a plan provider representative speaks with a participant to discuss 

whether he or she can take a hardship distribution under the terms of the plan, that discussion is 

not, and should not be, “investment advice” under any reasonable reading of ERISA section 

 

22 In fact, many notices actually required by the Code could be said to reflect the “appropriateness” of particular 

distribution options. This includes the notice that describes the consequences of a failure to defer a distribution 

under Code section 411(a)(11) and the relative value notices required by the regulations under Code section 417. 

See Proposed Regulations, 73 Fed. Reg. 59,575 (Oct. 9, 2008); 26 C.F.R. § 1.417(a)(3)-1(c). 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 23 of 32 

3(21)(A)(ii). Rather, the discussion is informing the participant on how he or she can access 

money desperately needed to address a significant hardship event. 

Further, rendering a service provider unable to present this level of information to participants 

will effectively drive employees to their employers for answers, increasing the overall burden on 

plan sponsors of offering plans. Accordingly, we urge the Department to provide that factual 

conversations concerning distribution options (including rollovers) would not be considered 

investment advice, including conversations regarding the pros and cons of a specific product or 

option.23 

B. The seller’s carve-out should be extended to plans of all sizes. 

Under the Proposal, a carve-out would be available for a counterparty that transacts with a plan 

fiduciary of a large plan (i.e., the “seller’s carve-out”). However, this carve-out is not available 

to small plans, IRA owners, and plan participants and beneficiaries, due to the carve-out’s 

requirement that the counterparty either obtain a written disclosure from the plan fiduciary that 

the plan has at least 100 participants, or that the counterparty reasonably believes that the plan 

fiduciary has responsibility for managing at least $100 million in plan assets. 

The Department explains in the Proposal that the overall purpose of the seller’s carve-out is to 

avoid imposing ERISA fiduciary obligations on sales pitches where plans do not expect a 

relationship of undivided loyalty or trust. In certain situations, the buyer is said to understand 

that it is buying an investment product rather than advice, and the seller’s invitation to buy a 

product is not understood to be a recommendation. In a change from the Department’s previous 

proposal to redefine the term “fiduciary” in 2010, the Department in its new proposal decided 

that the seller’s carve-out should not cover recommendations to retail investors. The Department 

states that “[m]ost retail investors and many small plan sponsors are not financial experts, are 

unaware of the magnitude and impact of conflicts of interest, and are unable effectively to assess 

the quality of the advice they receive.”24

The Department requested comments on whether the plan size limitation of 100 plan participants 

or the $100 million plan asset requirement are appropriate conditions. In response, we strongly 

urge the Department – at a minimum – to extend the seller’s carve-out to all plan fiduciaries, 

regardless of plan size.25 The consequences of not doing so will mean that small plans do not 

receive the guidance they need concerning products and services available to them. This result 

would very likely discourage small employers with fewer than 100 employees – who employed 

 

23 For example, we recommend that the Department remove the words “or any individual benefit distribution 

option” from the first sentence of proposed rule 29 C.F.R. § 2510.3-21(b)(6)(i). 

24 80 Fed. Reg. 21,942. 

25 In addition, if the Department retains the 100 participant threshold, we request that the Department confirm that 

the participant count used to determine whether a plan has more than 100 participants is determined via the 

aggregation of all plans sponsored by the employer and its affiliates. An employer with three plans of 90 

participants each is functionally similar to an employer with one plan containing 270 participants. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 24 of 32 

nearly 40 million people, or more than 30% of all employees, in 201226 – from offering or 

maintaining a plan for their employees. Multiple SPARK Institute members who are major 

providers of defined contribution services reported that more than 80% of the plans to which 

they provide services have fewer than 100 participants. Unless the Department addresses this 

critical problem by expanding the seller’s carve-out (and making the other changes we 

recommend), many plan fiduciaries will simply lose access to any assistance. 

 

Although we understand the Department’s comments that small plan fiduciaries may not have 

the extensive investment expertise that large plan fiduciaries have, in the context of the seller’s 

carve-out, the only question is whether the fiduciary is knowledgeable enough to know the 

difference between someone who is selling a product to the plan and someone who is 

undertaking to provide impartial investment advice. Extensive investment expertise is not 

required to make this determination. Owners of small businesses routinely deal in the 

marketplace and routinely deal with vendors of all kinds. A business owner can make 

independent judgments of this nature and does so all the time.27

If the service provider cannot provide any guidance to the plan sponsor, that means every plan 

must hire and pay an independent adviser at additional cost. According to one SPARK Institute 

member, only about 1/3 of plans under 100 participants have an independent adviser.28

 

ERISA already requires all plan fiduciaries to be knowledgeable and sophisticated enough to act 

prudently when dealing with vendors. ERISA does not distinguish between fiduciaries of small 

and large plans – all fiduciaries are held to the same fiduciary standards. 

The seller’s carve-out would already require several conditions that we believe would provide 

adequate protection for small plans. For example, under (b)(1)(i)(B), the counterparty would be 

required to inform the plan fiduciary of the existence and nature of the person’s financial 

interests in the transaction. Also, as proposed, the counterparty must know or reasonably believe 

that the independent plan fiduciary has sufficient expertise to evaluate the transaction and 

determine whether the transaction is prudent and in the best interest of plan participants. If the 

counterparty has reason to believe that the plan fiduciary does not have such sufficient expertise, 

then the seller’s carve-out would not be available to that plan, regardless of the size of the plan. 

If the Department is not comfortable that these protections are enough with respect to 

transactions involving small plans, then we suggest that the Department consider introducing a 

requirement for a standard, easy-to-read disclaimer that would be provided to small plan 

 

26 ANTHONY CARUSO, U.S. CENSUS BUREAU, STATISTICS OF U.S. BUSINESSES EMPLOYMENT AND PAYROLL 

SUMMARY: 2012 at 1 (released Feb. 2015). 

27 The Department cites various studies purporting to show that individual investors may have difficulty

distinguishing different kinds of financial professionals. Even if these studies are analogous to the ERISA fiduciary 

question in the IRA context, the Department neither cites data, nor provides any substantive proof or analysis, that 

suggests small business owners are incapable of distinguishing a sales pitch from fiduciary investment advice. 

28 Other members report that a majority of plans, but certainly not all, have an intermediary. This is more common 

with insurance and investment managers that generally sell through intermediaries. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 25 of 32 

fiduciaries within the seller’s carve-out. By offering guidelines for the wording, font size, 

placement, and the manner and timing of its delivery, we believe that the Department could 

address its current concerns over loopholes in which boilerplate disclaimers can be used to 

escape fiduciary status. 

Another reason to support an expansion of the proposed seller’s carve-out is the relatively new 

408(b)(2) disclosure requirement for service providers. With the 408(b)(2) disclosure rules now 

in place, plan sponsors receive very detailed information including the financial interests of their 

service provider. Much of this information is repetitive to what would be required under the 

seller’s carve-out. Many of the concerns the Department heard over the seller’s carve-out in the 

2010 proposal have been addressed through the information now required to be included in the 

408(b)(2) disclosures. In this regard, we suggest that one alternative the Department might 

consider is making the seller’s carve-out available to small plans in each instance where the 

resulting transaction between a counterparty and the small plan would result (or has already 

resulted) in the provision of 408(b)(2) disclosures on the subject(s) of the transaction. 

We have two final comments on the seller’s carve-out. First, our members expressed concern 

about needing to “know[ ] or reasonably believe[ ]” that a fiduciary has a certain level of 

expertise – a standard that invites frivolous litigation. We recommend that the Department 

change the knowledge standard in (b)(1)(i)(B)(4) to “Has no reason to believe that the 

independent plan fiduciary does not have sufficient expertise....” Making this change would 

address our members’ concerns over the challenge of determining and documenting how the 

counterparty “knows or reasonably believes” the plan fiduciary has sufficient expertise. 

Second, our members thought that the “written representation” required in section (b)(1)(i)(B)(1) 

of the regulation was unnecessarily cumbersome, and added little to the disclosure that is 

provided under section (b)(1)(i)(C)(2) of the regulation. Thus, we recommend that the 

Department revise section (b)(1)(i)(B)(1) to track the disclosure in section (b)(1)(i)(C)(2). 

C. The platform provider carve-out should be expanded to apply to IRAs. 

Under the Proposal, a carve-out would be available to a platform provider who “merely markets 

and makes available to an employee benefit plan...securities or other property through a 

platform or similar mechanism” as long as the platform provider discloses in writing to the plan 

fiduciary that it is not undertaking to provide impartial investment advice or to give advice in a 

fiduciary capacity.29

 

The Department requested comments on whether it would be appropriate for service providers 

not to be treated as fiduciaries under this carve-out when marketing such platforms to IRA 

owners, or whether the carve-out should be limited to large plans. In response, we believe that 

the platform provider carve-out should be expanded to apply more broadly to IRAs and, 

accordingly, that it should not be further limited to only large plans. 

 

29 Proposed rule 29 C.F.R. § 2510.3-21(b)(3) (80 Fed. Reg. 21,957-58). 
Definition of the Term “Fiduciary” Proposed Rule 

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The reason is simple. The platform provider carve-out provides relief only for marketing a 

platform of investments. It is not investment advice to put together a platform that is not tailored 

to any particular investor simply because that platform includes some investments and excludes 

others. (No one would think, for example, that the New York Stock Exchange is providing 

investment advice because it allows for the trading of some securities and not others.) In fact, 

the platform “carve-out” is not a carve-out at all, but rather an expression of a common sense 

application of the term investment “advice.” 

EXAMPLE

An IRA provider offers 500 mutual funds and 50 ETFs for investment. The IRA provider 

markets the platform, but does not provide any recommendations as to which of the 550 

investments an IRA owner should choose. The fact that the platform carve-out under 

the Proposal does not apply suggests that somehow this provider has furnished 

investment advice simply by not allowing the entire universe of possible investments on 

the platform. 

EXAMPLE

An insurance company offers an IRA platform consisting of 20 variable and fixed 

annuities not tailored to or designed for any particular investor. Similar to the example 

above, the fact that the platform carve-out under the Proposal does not apply suggests 

that somehow the insurance company has furnished investment advice simply by not 

allowing the entire universe of possible investments on the platform. 

In addition, the carve-out for platforms needs to take into account the likelihood that mechanisms 

for marketing investments and plan services could change in the future. For example, 

Washington State has recently enacted legislation to create a retirement plan product 

clearinghouse. Similarly, third parties and trade associations may decide to create private 

marketplaces allowing multiple providers to market their services to small plans. Simply put, the 

concept of a “platform” needs to be flexible. 

D. The selection and monitoring carve-out should not be available only when a 

plan fiduciary specifies the objective criteria. 

A carve-out is available under the Proposal for selection and monitoring assistance in connection 

with certain platform provider activities with respect to a plan where the platform provider 

“[m]erely identifies investment alternatives that meet objective criteria specified by the plan 

fiduciary (e.g., stated parameters concerning expense ratios, size of fund, type of asset, credit 

quality)” (emphasis added). Consequently, this carve-out would not be available if a platform 

provider identifies investment alternatives for a plan based on objective criteria suggested by the 

platform provider itself (or any other person that is not a plan fiduciary). 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 27 of 32 

EXAMPLE

A 401(k) platform provider offers 2,000 mutual funds. The provider does not provide 

investment advice, but offers a sample investment policy statement to all its clients that 

can be used as is or modified. The provider also has a set of commonly used screening 

criteria to assist a plan fiduciary in narrowing down the possible choices of funds to 3-4 

per asset class. These criteria would be described to the plan fiduciary, who retains 

authority to approve (or modify) the screening criteria. The platform provider’s 

identification of the screening criteria in this manner could result in the selection and 

monitoring carve-out not being available in this situation. 

Furthermore, the carve-out would be similarly unavailable in cases involving individuals, 

regardless of whether an IRA owner or the platform provider supplied the objective criteria. 

EXAMPLE

An IRA owner uses an online brokerage platform that has computerized interactive 

screening tools. The tools allow the user to specify criteria (e.g., peer fund 

performance, maximum expense ratio, asset class, and Morningstar rating) to screen 

funds. Because the carve-out for selection and monitoring assistance is not available, 

by implication this could be considered investment advice even though the IRA owner 

specifies the screening criteria. 

Service providers perform an invaluable role in helping plan fiduciaries and individuals parse 

through what could be hundreds or thousands of investment alternatives. Many service providers 

have developed tools that are widely utilized to help such persons with this task, yet under the 

Proposal, the use of such tools in many cases would mean the service provider could no longer 

rely on the selection and monitoring carve-out to ensure that it would not be treated as a 

fiduciary. Absent changes to the Proposal, such tools are likely not investment education, 

because they identify specific investment alternatives. 

EXAMPLE

A 401(k) provider will, as part of its presentation for a new or prospective plan sponsor 

client, provide a sample plan line-up, which includes information regarding direct and 

indirect compensation as required by section 408(b)(2), to help the plan sponsor 

evaluate the pricing. The “sample” includes a disclaimer stating that it is only a sample. 

The plan sponsor is free to choose any investments available on the platform. The 

provision of the “sample” could be viewed as a “suggestion” and may not be eligible for 

the selection and monitoring carve-out. 

While some RFPs do request certain screening, it is more common for a plan sponsor (or the 

plan’s consultant or advisor) to simply require or request a sample line-up as part of an RFP. As 

long as the sample is not presented as a recommendation or as fiduciary advice, the use of a 

sample in marketing the platform should not trigger fiduciary status. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 28 of 32 

Finally, it is common for plan fiduciaries to request that providers present investments that they 

might consider in their analysis for “mapping” in connection with a qualified change in 

investment options under section 404(c)(4) of ERISA. Such “mapping” support, in which a 

service provider provides examples of funds that are reasonably similar to those on the plan’s 

menu, should not be fiduciary in nature, as long as the presentation of investments is 

accompanied by a disclosure similar to that required under the platform carve-out. 

Accordingly, we recommend the following changes to the carve-out for selection and monitoring 

assistance: 

• The carve-out should not be limited to selection and monitoring assistance provided in 

connection with a platform. 

• The carve-out should be available if the service provider identifies investment 

alternatives based on objective criteria disclosed to the advice recipient (rather than 

“specified” by the advice recipient). This could be accompanied by a disclosure that says 

the plan sponsor may request additional screenings of investment options using 

alternative criteria. 

• The Department should confirm that the furnishing of a sample menu is consistent with 

the “marketing” of a platform. 

• The Department should confirm that “mapping” assistance is not fiduciary in nature if 

accompanied by an appropriate disclosure. 

IV. Because the Best Interest Contract Exemption is not Designed for Service Providers, 

We Urge the Department to Make the Changes Requested Above to the Scope of 

Investment Advice, Recommendations, and the Carve-Outs so that Service 

Providers May Continue Performing their Important Functions for Plans and 

Retirement Savers 

As noted in the Proposal, investment advice fiduciaries to plans and plan participants must meet 

ERISA’s standards of prudence and loyalty to their customers. These fiduciaries face steep 

penalties if they engage in a prohibited transaction unless the transaction is permitted by an 

exemption. IRA fiduciaries, while not subject to the same fiduciary standards under ERISA, 

must adhere to the similar prohibited transaction rules set forth in the Code. 

Because the Proposal would result in a substantial increase in the number of persons who 

provide investment-related services to plans and retirement savers being treated as fiduciaries 

than are treated as such under current law, the Department simultaneously proposed BICE in 

order to provide relief from the prohibited transaction rules on certain compensation received by 

an investment advice fiduciary as a result of a plan’s or IRA’s purchase, sale, or holding of 

specifically identified investments. 

The SPARK Institute’s members have substantial concerns with the workability of BICE for 

their purposes as recordkeepers, third-party administrators, and other service providers to plans 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 29 of 32 

and IRAs. Based on numerous discussions with our members, we believe that many retirement 

service providers will not attempt to use BICE at all. In this regard, our members have expressed 

the following concerns with BICE: 

• The necessity of entering into a written contract under BICE is very problematic, and it 

makes little sense to ask a prospective customer to enter into an agreement for services 

when they have not even been informed of what those services will entail; 

• The various conditions are not workable with respect to call centers, because it is not 

possible to ensure – nor even feasible to imagine – that every participant has entered 

into the contract with every call center representative with whom they might speak; 

• Entering into a contract with existing customers would be problematic for many reasons, 

such as the expense of doing so, challenging logistics, and dealing with customers who 

fail to respond to their service provider’s requests regarding entering into a contract (or 

even amending an existing contract); 

• The numerous and lengthy disclosures will not be effective, particularly the requirement 

to operate a continuous website with detailed information on every investment 

available in any plan or IRA; 

• The disclosures are completely unnecessary in light of the carefully considered and 

detailed disclosures required under the Department’s new disclosure rules (408b-2 and 

404a-5), and every other disclosure given to participants; 

• The requirement to provide advice in the “best interest” of the recipient implies that there 

is one “best” solution even if, for example, multiple funds could be in the recipient’s 

best interest; 

• The “best interest” standard in BICE appears to replicate the duties in section 404 of 

ERISA, but BICE adds the additional requirement that any advice be provided “without 

regard to the financial or other interests of the Adviser, Financial Institution or any 

Affiliate, Related Entity, or other party” – a standard that raises additional litigation 

concerns as it will often be very hard to prove that a business entity has acted without 

any regard to its interests; 

• The degree to which BICE intentionally increases litigation risk for plan sponsors and 

other fiduciaries will discourage plan adoptions and encourage plan terminations; 

• The contractual terms regarding impartial conduct standards that BICE requires would 

endanger the very uniformity in ERISA’s application that was sought by Congress 

through ERISA’s preemption rules and exclusive federal jurisdiction over the statute 

because the state causes of action that will be brought under the impartial conduct 

standards will inevitably lead to inconsistent state court interpretations of section 404 of 

ERISA; 

• The requirement to enter into an agreement that provides for a private right of action is 

unnecessary in the context of ERISA plans because ERISA already contains provisions 

providing for fiduciary duties and remedies; 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 30 of 32 

• The onerous data collection requirements in Section IX of BICE, coupled with the 

Department’s right to publicly disclose any such data that the Department requested, 

presents a significant disincentive to use the BICE and should be deleted;30 

• Financial institutions should be able to use the BICE to provide advice to their own 

employees, and therefore Section I(c)(1)(i) should be deleted;31 and 

• It is unclear how BICE applies in the case of accounts that are transitioned from an 

account to which BICE did not apply to an account where use of BICE would be 

necessary (e.g., where the original account consists of assets not permissible under 

BICE). 

EXAMPLE

One SPARK member estimated the cost to build the systems to comply with the BICE 

based on what has been proposed. Based on expenditures to comply with the 

408(b)(2) and 404a-5 regulations, as well as the known costs of building platforms to 

deliver client agreements and SEC Form ADVs, the member estimates it would take fifty 

employees working full time exclusively on implementation. This is just for the initial 

build and does not cover subsequent costs. 

Recordkeepers and other service providers perform many invaluable services today for plans and 

retirement savers. It is imperative that they be able to continue providing their helpful tools and 

information to plans and individuals without being subjected to unreasonable burdens. BICE is 

not appropriate for interactions that should not be fiduciary in nature in the first place. Instead, 

we urge the Department to carefully consider our requests and suggestions in the previous 

sections of this letter regarding the scope of investment advice, the term “recommendation,” 

and the carve-outs under the Proposal. We believe that the changes requested above, such as 

appropriately narrowing the definition of what constitutes “investment advice” at the outset, and 

better accommodation for service providers, small plans, IRAs, and existing investment 

education tools within the proposed carve-outs, will be most effective in enabling service 

providers to continue performing their crucial functions while also appropriately protecting plans 

and retirement savers. 

 

30 A similar concern we have is that BICE would require advisers and financial institutions to affirmatively warrant 

that they “will comply with all applicable federal and state laws regarding the rendering of the investment advice, 

the purchase, sale and holding of the Asset, and the payment of compensation related to the purchase, sale and 

holding of the Asset.” This warranty potentially sweeps in many other laws and requirements that could include 

carefully crafted federal or state private rights of action or for which Congress or a state legislature has deliberately 

decided not to allow private rights of action. 

31 The only justification the Department gives for this exclusion is by reference to the “special nature” of the 

employee/employer relationship. We believe that employees of financial institutions can benefit from the advice 

services of their employers, which are typically provided at low cost, especially in light of the protections in the 

BICE. It is not in these employees’ interest to have less access to advice than other American workers. 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 31 of 32 

V. The Timing Proposed for the Effective and Applicability Dates is Much Too Short

The Proposal states that the final rule would be effective 60 days after publication of the final 

rule in the Federal Register, and the requirements of the final rule would generally become 

applicable eight months after publication of the final rule. We respectfully request that the 

Department materially extend these dates. 

The SPARK Institute’s members – along with the entire regulated community – will need a 

substantial amount of time to evaluate the final rules and determine how to comply with them. 

The Proposal will have a significant impact and require substantial investments of thought and 

time beyond whatever information technology developments will be required. It will impact 

how businesses are organized, how service providers work with each other to meet the needs of 

plan sponsors and participants, the training of representatives, consultants, and customer service 

representatives, how people are compensated, how products are designed, changes to current 

educational materials (both paper and web-based), and more. Our members will need time to 

work with their customers to educate them about the new rules and help them understand the 

impact of the rules on their products and service arrangements. To the extent that the final rule 

necessitates new agreements or amendments be signed between our members and their 

customers, even more time to comply with the final rule will be needed as such requirements 

would entail action on the part of customers and not just service providers. 

Accordingly, we urge the Department to allow 36 months from the date a final rule is published 

for such rule to be applicable to allow sufficient time for the regulated community to comply. 

An insufficient compliance timeline will force service providers to immediately halt longstanding services to industry partners, plan sponsors, and retirement investors, resulting in a great 

deal of dissatisfaction and trust issues that can be avoided with sufficient time allotted to impose 

such sweeping changes. Because the Department requested comment on over 100 aspects of the 

Proposal, it is not feasible for our members to take any action toward implementation before a 

final rule is published. 

The retirement industry has spent 40 years organizing itself around the current definition of 

fiduciary investment advice. This cannot be undone in 8 months. 

In addition, we see no reason the regulation should be effective almost immediately. The 

effective date and the “applicability date” should be the same. Otherwise, service providers are 

subject to immediate liability risk without being afforded time to come into compliance. 

Although having a later applicable date may provide some protection prior to the applicable date 

for our members from actions by the Department or the Internal Revenue Service, we are very 

concerned that the proposed effective date of only 60 days after publication of the final rule will 

create potential liabilities and subject our members to lawsuits before they have an adequate 

opportunity to comply with the final rule. 

* * * * * 
Definition of the Term “Fiduciary” Proposed Rule 

July 21, 2015 

Page 32 of 32 

The SPARK Institute appreciates the opportunity to provide these comments to the Department. 

If the Department has any questions or would like more information regarding this letter, please 

contact me or the SPARK Institute’s outside counsel, Michael Hadley, Davis & Harman LLP 

(mlhadley@davis-harman.com or 202-347-2210). 

 Sincerely, 

 

 Tim Rouse 

 Executive Director