Timothy E. Keehan

VP, Senior Counsel

Center for Securities Trusts & Investments

202-663-5479

tkeehan@aba.com

July 21, 2015

Mr. Joe Canary, Director

Office of Regulations and Interpretations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Ave., NW, Room N-5655

Washington, D.C. 20210

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

Retirement Investment – RIN 1210-AB32; Proposed Exemptions and Proposed 

Amendments to Exemptions – ZRIN 1210-ZA25

Dear Mr. Canary:

The American Bankers Association1(ABA) appreciates the opportunity to provide comments to

the Department of Labor (Department) on the proposed rule (Proposal) regarding the expanded 

circumstances under which a person is considered to be a “fiduciary” under the Employee 

Retirement Income Security Act of 1974 (ERISA) or the Internal Revenue Code (Code). The 

Proposal is a revised and expanded version of the Department’s original proposed rule from 

2010, which would have broadly expanded the definition of “fiduciary” under ERISA. 

Retirement investors have long looked to and relied on their bank to provide retirement services, 

including investment products, retirement planning, and investor education, in order to achieve a 

secure financial retirement. Banks, when acting in their capacity as fiduciaries, have always 

sought the best interest of their customers and take great pride and satisfaction in successfully 

serving their customers’ retirement needs. We agree with the Department that retirement service 

providers, when acting in their capacity as fiduciaries, should act in the best interest of customers

and that such customers deserve to be protected from financial abuse. We also believe that 

regulations should be careful to meet their goals without unintentionally stifling the delivery of 

retirement products and services to customers, or capturing communications or relationships that 

are not appropriately regarded as fiduciary in nature. 

 

1 The American Bankers Association is the voice of the nation’s $15 trillion banking industry, which is composed of 

small, regional, and large banks that together employ more than 2 million people, safeguard $11 trillion in deposits, 

and extend more than $8 trillion in loans. Many of these banks are plan service providers, providing trust, custody, 

routine deposit/cash management, and other services for institutional clients, including employee benefit plans 

covered by the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Our member 

banks also routinely provide services for retail clients through individual retirement accounts and similar accounts 

that are covered by the Code. Learn more at www.aba.com.
2

The definition of “fiduciary” is a foundational element of ERISA. Consequently, any structural, 

transformative change to the definition will fundamentally affect the availability and delivery of 

retirement products and services provided by our member banks. This calls for measured, 

targeted, and sensible agency rulemaking, since “[g]overnment actions can be unintentionally 

harmful, and even useful regulations can impede market efficiency.”2 Any proposed rule, 

therefore, should (i) convincingly demonstrate a “compelling need” for such a change and (ii) 

employ the “least burdensome tools” to accomplish its objective(s).3 

We believe that the Proposal neither demonstrates a compelling need to undertake a wholesale

regulatory change nor employs the least burdensome tools to effect such change. On the 

contrary, we believe that the Proposal is overbroad and overreaching, and that it captures many a

person who provides valuable services to plans and plan fiduciaries but who should not be 

viewed as, nor reasonably considered to be, a “fiduciary” under ERISA and the Code. If adopted 

in its current form, the Proposal is likely to harm the very plan participants, beneficiaries, and 

IRA account owners that the Department is seeking to protect by making it extremely difficult, 

complex, and costly – and in some cases, impossible – for banks to make available and deliver 

the products, services, and information necessary, helpful, and appropriate for achieving a

financially sound retirement. As a result, the retirement planning benefits provided to these

individuals will be significantly reduced, or eliminated altogether.

Furthermore, we note that the Department has focused much attention and much of its regulatory 

analysis on retail consumers and the retail IRA marketplace, and we question whether the 

Department has adequately analyzed the need for the Proposal and the cost of the Proposal in the 

institutional marketplace. We believe the Proposal could cause a massive disruption to the 

institutional marketplace, particularly by eliminating the requirement that investment advice be 

the result of a “mutual understanding” between the provider and recipient of the advice, and that 

the advice form a “primary basis” for investment decisions. We further believe that the 

Department has not presented sufficient evidence of the need for such a monumental shift in the 

investment management and institutional plan relationship. 

Therefore, consistent with agency rulemaking standards, we respectfully request that the 

Department withdraw the Proposal, further analyze and evaluate regulatory alternatives that are 

less burdensome and costly, and re-submit for public review and comment an amended Proposal 

that is more appropriately targeted to achieve the Department’s regulatory objectives. 

Without limiting the primacy of the foregoing request, we also wish to comment on several

specific portions of the Proposal that are of particular concern to our members and which the 

Department should consider fully in its evaluation of the Proposal. While they will not cure the 

concerns expressed above, these comments are aimed at minimizing disruptions to retirement 

plan administrative and operational services while maintaining sufficient protections for plan 

participants and IRA account owners. We further wish to reserve the opportunity to comment 

further after we have carefully reviewed the record and the testimony presented in the upcoming 

hearings on the Proposal.

 

2 OMB Circular A-4 (Sept. 17, 2003).

3 Executive Order 13563 (Jan. 18, 2011).
3

I. Overview of the Proposal.

Section 3(21)(A) of ERISA and section 4975(e)(3) of the Code each provides that a person is a 

“fiduciary” with respect to a “plan” (defined to include IRAs) to the extent such person (i) 

exercises any discretionary authority or discretionary control with respect to management of such 

plan or exercises any authority or control with respect to management or disposition of its assets; 

(ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to 

any moneys or other property of such plan, or has any authority or responsibility to do so; or 

(iii) has any discretionary authority or discretionary responsibility in the administration of such 

plan.4

In the Proposal, the Department proposes to expand part (ii) above of the fiduciary definition by 

re-interpreting what it means for a person to render “investment advice for a fee or other 

compensation” under ERISA and the Code. The Proposal provides that a person becomes a 

fiduciary when such person –

(1) provides investment or investment management recommendations or appraisals to 

an employee benefit plan, a plan fiduciary, participant, or beneficiary, or to an 

IRA owner or fiduciary; and 

(2) either (a) acknowledges the fiduciary nature of the advice, or (b) 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.5

The Proposal would replace the current five-part test of the Department’s regulations,6 which the 

Department believes allows many investment professionals, consultants, and advisers to be free 

of any obligation to adhere to ERISA’s fiduciary standards or to the prohibited transaction rules

governing fiduciary conduct. The proposed re-definition, the Department argues, “better reflects 

the broad scope of the statutory text and its purposes and better protects plans, participants, 

beneficiaries, and IRA owners from conflicts of interest, imprudence, and disloyalty.”7

The Proposal includes a series of exclusions or “carve-outs” from the general definition of 

investment advice intended to exclude activities that “should not be treated as fiduciary 

 

4 ERISA § 3(21)(A); see also Code § 4975(e)(3). [Emphasis added.]

5

Proposal § 2510.3-21(a), 80 Fed. Reg. 21,928, 21,929 (2015). [Emphasis added.]

6 The Department’s current regulation creates a five-part test for determining whether a person should be treated as a 

fiduciary by reason of rendering investment advice. See 29 C.F.R. § 2510.3-21(c). For advice to constitute 

“investment advice,” an adviser who does not have discretionary authority or control with respect to the purchase or 

sale of securities or other property for the plan must – (1) render advice as to the value of securities or other 

property, or make recommendations as to the advisability of investing in, purchasing or selling securities or other 

property, (2) on a regular basis, (3) pursuant to a mutual agreement, arrangement or understanding, with the plan or 

a plan fiduciary, that (4) the advice will serve as a primary basis for investment decisions with respect to plan assets, 

and that (5) the advice will be individualized based on the particular needs of the plan. See id.

7

Id. at 21,929.
4

investment advice.”8 Furthermore, in order to preserve “beneficial business models” for delivery 

of investment advice, the Department also has separately proposed new exemptions from 

ERISA’s prohibited transaction rules “that would broadly permit firms to continue common fee 

and compensation practices, as long as they are willing to adhere to basic standards aimed at 

ensuring that their advice is in the best interest of their customers.”9 Thus, the Department 

believes that it has struck an appropriate balance, putting forth a “broad regulatory package” that 

“aims to enable advisers and their firms to give advice that is in the best interest of their 

customers, without disrupting common compensation arrangements under conditions designed to 

ensure the adviser is acting in the best interest of the advice recipient.”10 We believe that the 

Proposal fails to achieve its stated goals and will, in practice, be harmful to retirement investors, 

and we must therefore respectfully disagree with the Department’s assertions.

II. General Concerns.

Rather than reflecting a targeted approach focused on industry bad actors, the Proposal manifests

an indiscriminate policy that would fundamentally reshape familiar, secure, and longstanding 

business and customer relationships without achieving the Department’s goal of financial 

customer protection. The result would be a dramatically restructured advisory scheme 

precariously founded on the implausible notion that customers will somehow nevertheless retain 

the same level of access to investment advice, and presumably at a substantially reduced cost and 

with added legal protection. The Proposal, however, does not account for the tremendous 

compliance burden placed on the retirement services industry, with its attendant increased 

liability exposure, labor, and costs, or the potential ramifications of fundamentally rewriting how 

the fiduciary prohibited transaction rules will apply. This will likely result in less availability of 

these services, and at a greater cost, because the pricing necessary to sustain this new 

compliance model – with its accompanying risks and uncertainties – will likely far exceed the 

revenue currently generated from servicing retirement accounts. The Proposal, in the end, may 

be no more than a tax levied on the retirement system in exchange, ironically, for reduced 

availability and choice for retirement investors.

Throughout the Proposal, the Department reports that there is substantial and widespread 

industry abuse of retirement investors, particularly IRA owners, due to conflicted advice, and 

that investment returns are compromised as a result. The Department, however, does not cite or 

reference empirical evidence of widespread “conflicted” advisers who are systematically abusing 

plans or their participants, or IRAs or their owners. 

The restructuring of the retirement services industry as contained in the Proposal also has a 

reverberating affect across the entire financial services industry (an industry where the 

Department is not one of the primary regulators). As noted by one legal commentator:

Indeed, the unstated but fundamental premise of the reproposal is that the primary 

regulation of investment markets – by Congress, state legislatures, the OCC, SEC, 

FINRA, and other federal or state insurance and securities regulators – is 

 

8

Id. at 21,941.

9

Id. at 21,929.

10 Id.
5

inadequately protecting the interests of at least ‘retail’ retirement plan investors. 

Thus, the banking, insurance, and securities industries, as they participate in the 

retirement market, are to be restructured by the Labor Department under the 

auspices of the federal pension law, rather than by the authorities with the direct 

responsibility and the competence for those industries. And since DOL’s mission 

under ERISA includes no expertise in or responsibility for the health of those 

industries or the functioning of the distribution systems that support them, an 

ERISA regulatory proposal proceeding from that fundamental premise will 

inevitably lack balance.11

The Department’s wide reach under the Proposal can be seen in the Best Interest Contract 

Exemption (BICE), the Prohibited Transaction Exemption (PTE) to which most banks that wish 

to preserve their current business relationships with respect to retail retirement investors must 

conform. Under the BICE, the Department would be positioned to request banks to produce a 

wealth of data, including information on securities transactions, the amount of revenue received 

by the bank, and sales information. Furthermore, the Department reserves the right to disclose 

this information publicly, presumably without the permission of the bank’s primary regulatory 

authority. This may force banks to choose between conflicting legal and regulatory obligations 

involving the requirements of the Proposal versus the obligation to refrain from providing certain 

types of information to sources other than the bank’s primary supervisor, particularly when such 

information is potentially exposed to public disclosure. 

We are concerned that the Proposal, and specifically the BICE and the amendments to the other 

exemptions, departs significantly from the statutory program governing IRAs by interposing a 

new federal standard of care. The BICE imports ERISA prudence and loyalty principles to IRAs 

and further provides a private right of action for IRA owners by contract, including class action 

relief. The Department is doing what Congress specifically did not do when enacting ERISA. 

Unlike the statutory regime established to govern ERISA plans, Congress refrained from 

providing a federal fiduciary standard of care or statutory remedy for IRA owners, and it is 

doubtful that the Department has the authority to do so in the absence of a legislative mandate. 

In fact, contrary to the implication of various statements in connection with the release of the 

Proposal, IRA owners are not without remedies – they are protected by federal securities laws, 

state securities laws, and state fiduciary laws, in addition to supervisory tools at the disposal of 

bank regulators. We are, therefore, concerned that the Proposal oversteps the bounds from 

agency interpretive rulemaking into regulatory legislation of new standards and requirements for 

IRA services. Recognizing that the Department is implementing these changes through a 

number of exemptions that are, on their face, “voluntary” but as a practical matter are mandatory, 

the Department can be viewed as expanding its regulatory authority beyond congressional intent.

We do not necessarily object to the Department’s determination to eliminate the “regular basis” 

requirement of the current regulation, or to include the selection of investment managers or other 

plan managers as “advice.” We emphatically believe, however, that the Proposal, insofar as it 

 

11 “DOL Reproposes Expanded ERISA Fiduciary Definition and Revised Complex of Exemptions,” Sutherland 

Legal Alert (April 21, 2015). While we recognize that the Department has consulted with SEC staff, it does not 

appear from the Proposal’s contents that there has been comprehensive coordination between the Department and 

the SEC, or between the Department and the federal banking regulators.
6

would eliminate the “mutual understanding” and “primary basis” requirements of the current 

regulation with respect to institutional (or more sophisticated) plans and investment advisers and 

investment managers, represents a major change in current law for which the Department has 

presented no evidence of the need, nor understanding of how these changes would ripple through 

the $17.5 trillion retirement market. 

Moreover, it is one thing to assert that unsophisticated retirement investors may in isolated 

instances be confused, or even misled, into believing that a broker’s sales pitches and general 

discussions of investment markets are intended to be relied upon as fiduciary advice. It strains 

credulity, however, to assert that institutions, investment consultants, and professional and 

sophisticated IRA owners who may manage or oversee millions of dollars of assets are routinely

misled into believing (or should be viewed, as a policy matter, as being capable of being so 

easily misled) that a service provider –including a broker or investment adviser – is acting as a 

fiduciary to their plan before the service provider’s services are retained through a written 

agreement. As common business practices dictate, institutions and sophisticated investors

recognize that they need to have an understanding in place with their service provider regarding 

the terms of the service provider’s retention (including compensation, reporting, investment 

guidelines, scope of authority and responsibilities, and myriad other matters) before they can 

appropriately rely on the provider’s investment advice as being subject to fiduciary standards. 

The Department has not provided any evidence to support its fundamental restructuring of these 

common business relationships with service providers.

The “mutual understanding” requirement of the existing regulation also helps to address several 

matters the Department has not dealt with in the Proposal; namely, when does a service 

provider’s fiduciary status end, and what is required of the service provider during the period that 

the person is a fiduciary? If a service provider’s merely directing of an investment idea to the 

fiduciary of a retirement plan (with the expectation of compensation if the fiduciary acts on the 

idea) is enough to make the provider an investment advice fiduciary, when does that fiduciary 

relationship terminate? What is the scope of that fiduciary relationship? What are the duties of 

the investment advice fiduciary (having no understanding with the plan fiduciary as to the 

existence or scope of the relationship)? The Proposal provides no answers or guidance, but 

instead appears to leave this up to the courts to sort out. We believe that this is the wrong 

approach.

The Department has a duty to the public to set forth its views on how the elimination of the 

“mutual understanding” component of current law will affect the rights and obligations of 

affected institutions. This question goes well beyond the requirement that a fiduciary act in the 

best interest of the plan. In assessing the risks of providing services to plans and IRAs, those 

participating in the retirement services industry need to understand what terms the Department 

believes are being substituted for the “mutual understanding” of the parties, particularly in the 

institutional and sophisticated investor marketplace.

In addition, we believe the Department has not explained why it believes that plan fiduciaries 

who want to obtain particular information about the securities or commodities markets that they 

may “consider” in making their own investment decisions may do so only from a person who 

would be required to become an investment advice fiduciary with respect to such information. 
7

Common sense suggests otherwise, especially with respect to institutions, consultants, and 

sophisticated investors. Sophisticated plan fiduciaries may consider many pieces of information 

and viewpoints from multiple sources in making their investment decisions, and should be free to 

define, in agreement with their service provider, the terms and conditions under which they 

receive “investment advice,” “investment education,” or just data points. Many individuals will 

do the same sort of diverse research and have the same rational expectations regarding their 

secondary information sources. Indeed, sophisticated plan fiduciaries often seek information,

market “color,” and pricing data in casual conversations that neither the recipient nor provider 

currently expect will rise to the level of creating a fiduciary relationship with respect to such 

conversation. 

To expect the providers of small nuggets of information that may be “considered” by a plan 

fiduciary, but that clearly will not serve as a “primary basis” for investment decisions, to satisfy 

all of the requirements of sections 404 and 406 of ERISA will make it much more difficult, timeconsuming, and expensive for institutional and sophisticated plan fiduciaries to obtain the 

information they would like to receive from a wide variety of sources. There is simply no 

evidence to believe that institutional plan fiduciaries and sophisticated investors are being

systematically misled, disadvantaged, or harmed by the current definition of an investment 

advice fiduciary as they seek market information or viewpoints for their consideration in making 

their own investment decisions. The Department’s one-size-fits-all approach to applying strict 

liability prohibitions to all potential advice providers ignores the fundamental fact that plan 

fiduciaries, and not the service providers, are personally obligated to understand the environment 

in which they operate and the transactions that they undertake.

The Department also needs to provide further guidance on when a bank or other market 

participant would become an investment advice fiduciary in connection with the provision of

information or “advice” to an individual who may own, or may make investment decisions for, 

multiple investment portfolios. For example, a corporate executive or wealthy individual may be 

responsible for investing his individual (non-plan) assets, certain corporate assets, the 

corporation’s retirement plan assets, assets of a charitable or family foundation, his personal plan 

account within the corporate retirement plan, and his IRA assets. If a bank provides investment 

information to him, which information the individual (in his own mind) may consider for 

investment by any of the multiple investment pools for which he is responsible, when does the 

bank become an investment advice fiduciary where the information is ultimately used for a plan 

or IRA account? Can the bank avoid fiduciary status under ERISA or the Code by simply 

informing or contractually restricting the individual from using the investment information for 

his IRA or plan accounts? If he actually does use the information for his IRA or a plan account, 

does the bank need to assert a breach of contract claim to protect the bank from becoming an 

inadvertent fiduciary to the plan or IRA? How in practice will this work?

Again, it is not evident that the Department has fully considered the complexity of how the 

Proposal would apply to sophisticated individuals who are responsible for managing multiple, 

significant pools of assets that include both plan and non-plan assets. Indeed, if the Department 

takes the position that all financial or investment conversations with individuals who have any 

plan assets would subject the bank or investment adviser to ERISA fiduciary status with respect 

to the entire conversation, then the Department comes very close to supplanting the Securities 
8

and Exchange Commission and the banking regulators as the primary regulator of the financial 

markets and market participants, as the broad scope of the Proposal may result in the bank 

assuming that every conversation could result in the bank becoming a fiduciary, no matter how 

remote.

Based on the foregoing, it is clear that the Proposal, on its face, is an unfinished and incomplete 

work. It contains significant gaps and vague or undefined terms that make it difficult to analyze, 

evaluate, and determine precisely how it will impact banks and other retirement service 

providers. Perhaps recognizing this, the Department has requested that interested parties provide 

detailed comments and proposed language, presumably to address these gaps and terms so that 

the Department can rework the Proposal into a coherent, viable regulation. We are happy and 

eager to engage with the Department in such a consideration. The results of that work, however, 

should then be published for further comment, since it will likely include many important details 

that the Department has not yet exposed to public review. That is to say, that the Department’s 

solicitation of major public input to fill in gaps in the Department’s presentation does not solve 

the problem of commenting on an unfinished and incomplete rulemaking offered as a last stage 

in the rulemaking process. 

Conceptually, the Proposal reads more like an Advance Notice of Proposed Rulemaking 

(ANPR), and the Department should treat it as such, for the benefit of retirement investors, those 

who serve them, and the Department’s role in promoting those interests. The Department’s 

response to the Proposal’s discrepancies, however resolved, either will leave the Proposal 

deficient or will substantially change the content and applicability of the Proposal which, if then 

finalized, would not provide the public with an opportunity to review and comment on a 

significantly altered Proposal. Consequently, we believe the only reasonable course of action is 

to withdraw the Proposal (i.e., consider it as a further important ANPR exercise), followed by an 

opportunity for the public to review and respond to an amended, completed, and wholly 

functional Proposal. 

III. Specific Issues.

A. Proposed Exclusions from the Proposal’s Coverage.

1. Bank Deposit Products.

The Proposal is not clear on its applicability to, or treatment of, bank savings accounts, 

certificates of deposit, or other deposit products offered by a bank. Section 408(b)(4) of ERISA 

provides that the prohibited transaction provisions of section 406 do not apply to any investment 

in bank deposit products, provided the conditions of the exemption are met.12 Banks typically 

provide their IRA customers who are interested in making an investment with a list of the 

products offered by the bank, with their investment yield, and may answer questions about how 

the products work. Bank branch personnel, however, do not provide investment 

recommendations or discuss the customer’s retirement needs, but instead allow the customer to 

make the investment decision. 

 

12 ERISA § 408(b)(4); Code § 4975(d)(4) (parallel provision).
9

The Department should confirm that a bank’s disclosures and communications in connection 

with deposit products (e.g., savings account, certificates of deposit) offered by the bank to its

IRA and other customers are within the scope of section 408(b)(4) of ERISA and, provided the 

conditions of that section are met, are excluded from the scope of the Proposal. For example, if a 

customer would like to consider investment options for an IRA that would include a bank’s 

savings account or certificates of deposit, a bank offering these products should be able to 

provide the customer with a list of these products for IRA accounts (and applicable interest rates)

and, at the customer’s express direction, invest the customer’s IRA funds in such products, 

without triggering the definition of “advice” under the Proposal. Treating banks and their 

employees who have conversations with IRA customers as providing “fiduciary advice” not 

covered by section 408(b)(4) may force banks to eliminate IRA custody and trust services, which 

entail a relatively modest fee (e.g., $25 annual fee), and replace these services with an 

investment management account charging higher fees, in order to pay for the increased costs of 

compliance, record keeping, and systems administration, as well as for increased litigation risk. 

Similarly, banks typically provide their corporate and other business clients a product suite of 

bank deposit-related products often referred to as “treasury services” or “treasury management.” 

Included in this product suite are products designed to assist these business clients in more 

efficiently managing their liquidity needs. In addition to interest-bearing bank deposits (some of 

which have withdrawal and other transactional restrictions), these products would include

overnight investment sweeps into a number of options (such as money market mutual funds, 

commercial paper, overnight repurchases of government or agency securities, etc.) which 

continue to maintain the client’s ready access to cash while offering more alternatives to earn a 

reasonable short-term rate of return. If such products are not also carved out from triggering 

fiduciary status under the Proposal, then employee benefit plans may well end up with a 

restricted, narrow set of liquidity alternatives with potentially less favorable short-term rates than 

those available to other corporate clients (including the corporate sponsor’s own non-ERISA 

accounts).

2. Sales and Other Conversations and Communications with Customers.

The Proposal further is unclear as to whether, and to what extent, retirement service provider 

conversations with customers and prospective customers would trigger fiduciary status under 

ERISA or the Code. This is a critical omission, because the Proposal could be interpreted as 

capturing within the “investment advice” definition virtually any and every conversation –

including and especially sales conversations – in which a bank describes its products and 

services to a participant, beneficiary, plan fiduciary, or IRA owner. This stands in marked 

contrast with the current rule, in which sales activities routinely are excluded from fiduciary 

activity. 

Therefore, the Department should revise the Proposal to exclude from investment advice routine 

conversations between a retirement service provider and plans, participants, and IRA owners

regarding the products and services offered by the service provider. Not every conversation or 

sales pitch about the service provider’s offerings should be a “recommendation” (see section 

III.B.1.a., below). Failure to exclude such sales conversations would inhibit the retirement 

customer’s ability to obtain and understand investment information, promote awkward and 
10

truncated conversations between provider and customer, and possibly lead to reduced customer 

trust in the retirement provider’s ability to respond to the customer’s investment needs and 

objectives. 

a. Requests for Proposals.

The Proposal, for example, is ambiguous as to whether, and the conditions under which, a 

response to a request for proposal (RFP) would be treated as a fiduciary activity. Many plans 

and their consultants and advisers (including plans with fewer than 100 participants or less than 

$100 million in assets) will issue an RFP as part of the process of identifying potential 

investment managers and other service providers, and of obtaining sufficient information from 

those potential investment managers and service providers that enable the plan fiduciaries to 

make an informed decision. These RFPs frequently request a potential investment manager to 

provide information regarding how it might manage the plan’s portfolio, including by identifying 

a potential investment portfolio or a sample portfolio line-up, before the manager has any 

particular plan guidelines or other information about the plan that would enable it to satisfy its 

obligations under section 404 of ERISA.

Yet, by “directing” an answer to the plan fiduciary with the understanding that the plan fiduciary 

may “consider” the response (such as a “recommendation” that the plan fiduciary retain the 

prospective investment manager), the prospective investment manager may not be able to be 

hired for compensation under the terms of the Proposal. How can a plan administrator retain an 

investment manager if the prospective investment manager’s response to questions from the plan 

may make the prospective investment manager an investment advice “fiduciary” before the 

manager is actually retained (and therefore, make it a violation of ERISA for the prospective 

manager to receive a fee for investment management services)? As the Department noted in the 

context of the carve-out for counterparty transactions, the Department should “avoid imposing 

ERISA fiduciary obligations on sales pitches that are part of arm’s length transactions where 

neither side assumes that the counterparty to the plan is acting as an impartial trusted adviser, but 

the seller is making representations about the value and benefits of proposed deals.”13 

We request that the Department clarify that when a bank (or other entity) is responding to an

RFP or to an existing customer’s inquiry about the bank’s offerings and the bank (i) provides 

investment or portfolio information, or (ii) offers itself or an affiliate to provide additional 

services to the plan, that this action would not be considered “investment advice” under the 

Proposal. This would help ensure that the bank, in assisting a current or prospective customer, 

would avoid being unintentionally designated as a fiduciary under the Proposal. Again, there is 

no evidence that institutional plan fiduciaries and sophisticated investors are being misled about 

the role a bank is playing when the bank responds to the plan fiduciary’s RFP or provides other 

information to the plan fiduciary as part of the process of selling the bank’s services.

b. Corporate and Business Clients.

In addition, banks often discuss with their corporate and other business clients such clients’ 

deposit/cash management affairs in broad terms and may not even be aware (or be informed by 

 

13 80 Fed. Reg. at 21,941.
11

the client) that some of the assets or accounts involved in the discussion belong to employee 

benefit plans. Indeed, this lack of knowledge could very well persist until the relevant business 

is in the process of implementation (e.g., account opening). It seems patently unfair for an entity

to be deemed a “fiduciary” – regardless of the activity involved – where it simply does not know 

that it is dealing with a plan or a plan’s assets. Accordingly, the Department should provide a 

safe harbor for providers having discussions with corporate and other business clients about 

those clients’ deposit/cash management business generally, if they otherwise have no actual 

knowledge that the subject matter of those discussions includes employee benefit plans or plan 

assets. 

c. Qualified Accredited or Sophisticated Investors.

The Department has expressed concerns that most retirement investors and many small plan 

sponsors “are unable effectively to assess the quality of the advice they receive.”14 

Consequently, the Proposal does not permit a so-called “seller’s exception” for retail investors 

and small plan sponsors. This position, however, does not account for the fact that a number of 

financially sophisticated retail investors/small plan sponsors are able to assess the quality of 

investment advice and routinely make retirement investment decisions based on such 

assessments. These retail investors might be high-net worth individuals or otherwise possess 

sophisticated financial knowledge enabling them to make determinations regarding their IRA. 

Similarly, a number of small plan sponsors typically are familiar with defined contribution plan 

investment objectives and available investment choices. Coverage under the Proposal would 

likely restrict the availability and choice of investments and investment managers for such 

persons/entities. 

Therefore, the Department should exclude such qualified accredited investors from the scope of 

the Proposal, or at the least, from the scope of limitations applicable through the definition of 

“Assets” under the BICE and the new Principal Trade Exemption. Like similar rules of the 

Securities and Exchange Commission, the Department could propose financial worth/investment 

assets thresholds that would exclude persons/entities who meet or exceed those thresholds. In 

that regard, we strongly urge the Department to consider financial worth/investment asset 

thresholds that have been adopted by other financial regulators as proxies for sophistication and 

the ability to look out for one’s own interests, such as the “accredited investor” definition 

adopted under Regulation D under the Securities Act of 1933,15 or the “qualified purchaser” test 

adopted under the Investment Company Act of 1940.16 

 

d. Bank Employee Referrals.

The Proposal provides that investment advice includes “a recommendation of a person 

[providing any of the other defined types of advice.]”17 This provision may not permit employees 

of banks to do a “handoff” or to refer a colleague in another division of the bank (or to an 

affiliate), without potentially becoming an investment advice fiduciary solely by virtue of such 

 

14 80 Fed. Reg. at 21,942.

15 See Regulation D, 17 C.F.R. § 230.501 et seq.

16 See Investment Company Act of 1940, 15 U.S.C. § 80a-2(a)(51).

17 Proposal § 2510.3-21(a)(1)(iv), 80 Fed. Reg. at 21,957.
12

referral. For example, under the Gramm-Leach-Bliley Act (GLBA) and implementing federal 

banking and securities regulations, bank employees are expressly permitted to receive a fee for 

referring bank customers to the bank’s brokerage unit or unaffiliated third party. They are also 

permitted to receive discretionary bonuses where brokerage business can be a factor or variable 

in the discretionary decision-making process (as long as such business is one of multiple other 

non-brokerage factors or variables).18 Under the Proposal, however, such employee could be 

deemed a “fiduciary,” and therefore, subject to the prohibited transaction provisions of ERISA 

and the Code, regardless of whether a referral fee is received. 

It would be inconsistent to have an expressly authorized activity under the federal banking laws 

trigger potential liability under ERISA. Consequently, this section of the Proposal should be 

clarified to permit referrals (with or without a fee), whether under Rule 700 Referrals or where 

elsewhere permitted under applicable federal banking and securities regulations. Otherwise, 

retirement investors would be unable to know that their bank possesses the services that can 

assist the customer with retirement planning.

3. Foreign Exchange Transactions. 

The Proposal is unclear on whether, and under what conditions, a foreign exchange (FX) 

transaction would implicate fiduciary status. A number of banks conduct FX transactions on 

behalf of their plan customers. Banks typically rely on section 408(b)(18) of ERISA to conduct 

FX transactions for their plan clients without running afoul of the prohibited transactions 

provisions of section 406. Importantly, in order to rely on the exemption, a bank and its affiliates 

may not provide investment advice with respect to the FX transaction.19 The Department, 

therefore, should confirm that FX transactions conducted in accordance with the requirements of 

section 408(b)(18) of ERISA (or the conditions of another applicable prohibited transaction 

exemption) would not be treated as constituting fiduciary “investment advice” under the 

Proposal’s expanded definition.

4. Statements of Value.

a. Statements of Value Not Deemed Investment Advice.

As trustees and custodians of plans and IRAs, banks provide safekeeping and recordkeeping 

services. These services include providing a general statement to the plan, plan participant, or 

IRA owner, reflecting the value of the account’s assets and investments. Under the Proposal, 

“investment advice” includes “an 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, of such 

securities or other property by the plan or IRA.”20 Thus, it would appear that the routine 

provision of statements of value (i.e., not in connection with a transaction) would be exempt 

from the term “investment advice.” Despite the carve-out language, we continue to believe that 

 

18 See Regulation R, 17 C.F.R. § 247.700 (Rule 700 Referrals).

19 See ERISA § 408(b)(18)(D).

20Proposal § 2510.3-21(a)(1)(iii), 80 Fed. Reg. at 21,957. [Emphasis added.]
13

valuation services should not be deemed “advice” as no recommendation is involved in 

providing any such service. 

Under the Proposal, the question raised is what would be considered a “transaction” that triggers 

coverage under the valuation part of the definition. A plan fiduciary may receive a trust 

accounting statement listing the current values of the plan’s holdings and decide to buy or sell 

particular securities based on the information in that statement. Similarly, a plan participant or 

beneficiary may, unbeknownst to the bank, decide to enter into a transaction, such as an 

investment option transfer or a distribution, based on valuation information provided in the 

normal course – such as a benefit statement, on a plan website, or in response to a phone inquiry 

regarding current account values. As such values are provided as factual information regarding 

the plan’s or participant’s account and are not intended as recommendations as to whether to 

proceed with a particular transaction, they should not be treated as fiduciary “investment advice” 

for purposes of the Proposal.

The potentially broad impact of this definition is mitigated in part by a carve-out, which states 

that an appraisal, fairness opinion, and statement of value are not considered “investment advice” 

if, among other things, it is provided “solely for compliance with the reporting and disclosure 

provisions” under ERISA or the Code, or under “any applicable reporting or disclosure 

requirement under a Federal or state law, rule or regulation or self-regulatory organization rule or 

regulation.”21 However, security or investment option values provided in the manners described 

in the preceding paragraph are not pursuant to a reporting or disclosure requirement, and thus 

would not be within the scope of the carve-out.22 

An approach that would be better for the plans and retirement investors would be to treat these 

types of statements of value as falling outside the ambit of the definition of investment advice 

altogether. This would include, for example, statements of value issued in connection with – (i) 

participant-level transactions based on unit value net asset values (NAVs) regardless of whether 

the NAVs are provided as part of an account statement, through a call center, on a website, or 

other means; (ii) calculation of daily NAV for single plan unitized investment pools within 

participant-directed plans; and (iii) master trust plan accounting services. Such an interpretation

is especially critical, given the need for valuation to be provided separate and apart from any 

advice or recommendation. Plans and IRA owners need to know the value of investments in the 

account for various reasons, including required annual tax reporting and required minimum 

distributions. This valuation information in and of itself should not trigger fiduciary status 

simply because it relates to the investment or the possibility that, outside of the control or intent 

of the provider of factual information based on plan or accounting records, it may be considered 

in making a particular transaction decision. 

This interpretation would make sense, as it is common for banks to prepare and provide reports 

and statements more frequently than required under federal or state law. For example, many 

 

21 Proposal § 2510.3-21(b)(5)(iii), 80 Fed. Reg. at 21,958.

22 While ERISA § 105(a) requires that plan participants be provided with benefit statements, which arguably might 

fit into the scope of the carve-out (although this is not clear, since that provision does not specifically require that the 

benefit statement include a statement of the value of each individual account investment), there is no requirement to 

provide valuation information through a call center or website, so these would not be covered by the carve-out.
14

custodians, trustees, and recordkeepers, in addition to providing periodic (e.g., monthly or 

quarterly) statements, calculate daily net asset values for investment funds and make available 

continuous access online to current information regarding plan investments. Providing such 

periodic statements and online access and information is a purely administrative function and 

should not be considered a fiduciary act. Therefore, the Department should revise the Proposal 

to exclude from its coverage any statement of value that is not intended as investment advice.

b. Valuation of Collective Investment Funds and Other Plan Asset Vehicles 

with One Plan Investor.

The Proposal carves out from the definition of investment advice a statement of value of an 

“investment fund such as a collective investment fund . . . in which more than one unaffiliated 

plan has an investment, or which holds plan assets of more than one unaffiliated plan.”23 The 

Proposal, however, omits from the carve-out any investment fund, including unitized funds and 

separately managed accounts (such as a custom target-date fund) (collectively, Funds) that has 

only one plan investor. Banks administering these Funds, however, may have only one plan 

investor in a particular Fund for a variety of reasons, such as when the Fund is a start-up fund, 

when the Fund is winding down and has only one investor remaining, or when the Fund is a plan 

asset vehicle with a single plan investor that holds an interest exceeding twenty-five percent. A 

bank should not be penalized for providing valuations in connection with the establishment or

and termination of a Fund, or in other valid instances in which only one plan investor is in the 

Fund. The Proposal, therefore, should delete the above-quoted language to accommodate Funds

in this relatively common situation.

5. Disclosures and Other Account Information (e.g., Analytics Reports).

The Department should further clarify that the provision of disclosures and other account 

information (e.g., performance reports, account statements, transaction reports, confirmations, 

etc.) does not constitute investment advice. For example, analytics reports regarding (i) plan 

performance, (ii) an investment manager’s performance, (iii) an investment manager’s 

compliance with investment guidelines, or (iv) collateral management optimization, are 

informational only and do not involve rendering investment advice. Banks acting as directed 

trustees and custodians can assist plan sponsors and fiduciaries with their fiduciary oversight 

responsibilities by providing various analytics reports without rendering advice. Plan sponsors 

provide the criteria for the service provider’s analysis, and the bank service provider relies upon 

industry benchmarks or risk-return data obtained from third parties or proprietary algorithms that 

are commonly utilized and not customized by the plan sponsor. 

Similarly, a service provider may utilize reporting tools to filter for investment managers that 

satisfy the plan sponsor’s criteria for a particular investment mandate. In this instance, the 

database of investment managers (including performance data) is provided by a third party. The 

plan sponsor provides the selection criteria and the reporting tools are not customized by the plan 

sponsor. Also, a bank service provider may provide reporting on an investment manager’s 

compliance with the plan sponsor’s investment guidelines, on a post-trade basis, if such manager 

makes an investment that does not appear to be within the investment guidelines. Similarly, the 

 

23 Proposal § 2510.3-21((b)(5)(ii), 80 Fed. Reg. at 21,958.
15

bank may provide analytical reports, applying an algorithm to numerical inputs provided by the 

plan sponsor, to provide a ranking of securities to meet the plan’s collateral obligations.

The bank offers no investment advice when providing the aforementioned reports. It makes no 

recommendation regarding actions that might be taken by the plan sponsor as a result of such 

reporting. We believe such reports would be important information for a plan fiduciary to have 

in appropriately discharging its responsibilities to the plan; however, such information is unlikely 

to be made available by the bank service provider if merely providing such reports were to 

trigger fiduciary status under the Proposal. Consequently, the Department should confirm that a 

trustee’s or custodian’s provision of analytic reports to the plan, participant, beneficiary, or IRA 

owner does not trigger fiduciary status under the Proposal.

In addition to analytics reports, banks provide routine disclosures regarding account operations. 

These disclosures may contain information regarding investments held in a plan or IRA. For 

example, a bank may send information regarding a sweep option that, by definition, concerns an 

investment under the account, or comparison tools, but does not make any recommendation

concerning securities or other property. Therefore, the Department should confirm that 

operational disclosures and communications are not, in and of themselves, “advice” triggering 

fiduciary status under the Proposal.

6. Health Savings Accounts, Archer Medical Savings Accounts, and Coverdell 

Education Savings Accounts.

In addition to IRAs, the Department is considering whether to apply the Proposal to health 

savings accounts (HSAs), Archer Medical Savings Accounts, and Coverdell Education Savings 

Accounts (collectively, Non-IRA Accounts). The Department points out that, similar to IRAs, 

Non-IRA Accounts are given tax preferences under the Code, are subject to the Code’s 

prohibited transaction rules, and (in the case of HSAs) can be used as long-term savings accounts 

for retiree health care expenses.24 Non-IRA Accounts, however, differ significantly from IRAs 

in that they generally hold fewer assets and have shorter investment horizons. If included within 

the Proposal, there is serious danger that such accounts likely would lose many of the institutions 

that today provide services due to the small asset size of the accounts, when weighed against the 

cost to service such type of account under the Proposal. For these reasons, Non-IRA Accounts 

should be excluded from the Proposal’s coverage.25 

B. Proposal’s Definitions.

1. Proposed Rule.

a. Definition of “Recommendation.”

The Proposal’s overbroad definition of a person who renders investment advice (and therefore 

becomes a “fiduciary” under Proposal) hinges on the Department’s use of the term 

 

24 80 Fed. Reg. at 21,947.

25 See ABA HSA Council comment letter to the Department (July 21, 2015) for a detailed discussion on the 

application of the Proposal to HSAs.
16

“recommendation,” which it defines to mean “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.”26 Equating the words 

“recommendation” and “suggestion” in this way, when coupled with a strict liability prohibited 

transaction regime, could actually harm retirement investors and is, we believe, unwarranted. 

Making a “suggestion” a basis for fiduciary responsibility is an unprecedented stretch of the term 

that belittles the concept of fiduciary duty while effectively silencing communication that can be 

worthwhile to retirement investors. 

Inclusion of the word “suggestion” within the term “recommendation” captures a vast swath of 

written or oral communications that are not intended as a bona fide recommendation. This will

serve only to cut off or stifle a retirement provider’s conversations with its retirement customers

and potential customers, for fear that any such conversation could be deemed a “fiduciary” 

action. 

The definition, therefore, should be sensibly narrowed and targeted to reach only those instances 

in which recommendations are actually intended and balanced with the potential penalties of 

becoming a fiduciary. To achieve this result, we request that the definition of “recommendation” 

be revised to read, “a communication that is a clear, affirmative statement of active endorsement 

and support for the advice recipient to engage in or refrain from taking a particular investment 

course of action that is based on the individual needs of the advice recipient.” This would ensure 

that both the retirement services provider and the retirement customer would be able to know 

when a recommendation is genuinely taking place. 

2. Best Interest Contract Exemption.

The Proposal includes a proposed new Prohibited Transaction Exemption, the “Best Interest 

Contract Exemption,”

27 intended to allow fiduciaries to receive compensation that would 

otherwise not be permitted under ERISA and the Code while reaching to Proposal’s objective of 

ensuring that the fiduciary’s advice is in the best interest of its customers.28 The purpose of the 

BICE appears to be to continue to allow current compensation arrangements between banks and 

mutual funds (for example, 12b-1 fees paid to the bank for services provided to the fund), 

provided its multiple conditions are satisfied. Banks that become fiduciaries as a result of the 

Proposal and that are not eligible to rely on the BICE would be exposed to the prohibited 

transaction provisions of section 406 of ERISA and section 4975 of the Code for any 

compensation received from a mutual fund or other investment product recommended (or 

possibly merely made available) by the bank to its IRA or other retirement plan customers. 

Consequently, any bank that wishes to receive, or continue receiving, compensation from such 

arrangements would be required to rely on the BICE in the absence of any other available 

exemption. As noted above, clarifying that general disclosures and operational communications 

are not considered “investment advice” under the Proposal would help ensure that a bank does

not feel compelled to rely on the BICE simply based on the Proposal’s lack of clarity and the 

bank’s reasonable desire to avoid prohibited transactions.

 

26 Proposal § 2510.3-21(f)(1), 80 Fed. Reg. at 21,960.

27 See Proposed Best Interest Contract Exemption, 80 Fed. Reg. 12,960 (Apr. 20, 2015).

28 Id.
17

a. Definition of “Financial Institution.”

The BICE provides that a “financial institution” and its affiliates and related entities are the only 

corporate entities eligible to rely on the BICE. Under the BICE, the definition of “financial 

institution” reads in relevant part: “A bank or similar financial institution . . . but only if the 

advice resulting in the compensation is provided through a trust department of a bank.” Since 

many banks, including community banks, do not have a trust department, they would be 

categorically excluded from relying on the BICE, and therefore, effectively unable to serve their 

IRA customers. 

There is no policy reason for this arbitrary distinction being included in the BICE, which would 

only serve to drive these banks from the IRA marketplace altogether. Banks without trust 

departments routinely and successfully serve IRA customers through the retail portion of their 

branches. There is no requirement for banks to operate a trust department in order to provide 

IRA products and services. The Department, therefore, should delete from the BICE the

qualifying requirement that banks provide advice through a trust department (see the italicized 

language referenced above), so that all banks may continue serving their IRA customers. 

b. Definition of “Asset.”

Reliance on the BICE is limited to a fiduciary’s offering of certain types of assets to retirement 

investors. The BICE defines an “asset” generally as bank and insurance products, U.S.

government and corporate debt, and registered equity securities.29 This is a narrow range of 

assets and does not reflect the state of the current investment environment. A great number of 

plans and IRAs are invested in non-registered assets such as real estate, limited partnerships, 

hedge funds, private equity funds, commodities (such as minerals, oil, and gas) and other 

alternative investments. The Proposal therefore should be modified to allow for such assets to 

be included within the BICE.

C. Proposal’s Carve-Outs.

In the Proposal, the Department has set forth certain “carve-outs” to the definition of investment 

advice. As a threshold matter, many of the concerns we raise below regarding these “carve-outs” 

exist because the Proposal as currently structured is overbroad. Accordingly, there are 

considerable risks to what we believe are appropriately excluded activities if the “carve-outs” fail 

to be sufficiently inclusive and flexible. 

1. Counterparty Transactions (Seller’s Carve-Out).

The first carve-out is the so-called “seller’s” carve-out, which permits advice to independent plan 

fiduciaries who represent large plans (i.e., those with 100 or more participants) or who manage

$100 million or more in employee benefit plan assets, in connection with an arm’s length sale, 

purchase, loan, or bilateral contract.30 The Proposal states that the purpose of this carve-out “is 

to avoid imposing ERISA fiduciary obligations on sales pitches that are part of arm’s length 

 

29 See 80 Fed. Reg. at 21,987.

30 Proposal § 2510.3-21(b)(1), 80 Fed. Reg. at 21,957.
18

transactions where neither side assumes that the counterparty to the plan is acting as an impartial 

trusted adviser, but the seller is making representations about the value and benefits of proposed 

deals.”31

The proposed seller’s carve-out raises four issues. First, it may be impractical to set a hard limit 

of 100 participants and $100 million in assets as thresholds without allowing for flexibility in 

instances where plans or advisers might drift below these numbers temporarily, or might 

fluctuate between these thresholds, over the course of the year. In order to avoid this result, 

when dealing with a single plan relationship, the Proposal should be amended to allow for 100 

participants or for a relevant assets test in two of the last three calendar years, or as reported on 

the plans’ Form 5500, so that business relationships between providers and plans are not 

disrupted or inadvertently fall outside the scope of the carve-out.

Second, the carve-out is too narrow for the routine business relationship between the adviser and 

these plans. Specifically, the carve-out should encompass the entire relationship between the 

adviser and the plan and not be limited to sales pitches and business transactions. Here, the 

adviser deals with an independent plan fiduciary which itself is an ERISA fiduciary over a large 

plan and thus should have the degree of financial sophistication and business expertise necessary 

to represent capably the interests of the plan and its participants. The conditions laid out in the 

carve-out32 could be part of the overall contractual relationship between the two parties, thus 

ensuring that the independent plan fiduciary is sufficiently protecting the plan and its 

participants.

Third, the seller’s carve-out does not apply to plan participants or IRA owners, or to any plan 

with fewer than 100 participants (unless the plan is managed by a fiduciary with at least $100 

million of employee benefit plan assets under management). The carve-out, therefore, should be 

extended to retail and small plan transactions in order to determine the point at which 

investment advice is rendered to the individual. As discussed above, without the seller’s carveout, banks providing IRA services to their customers, for example, would not know when routine 

conversations about IRAs would cross over into “recommendations,” or whether a bank’s merely 

providing its customer a complete list of the bank’s offered investment products by itself and not 

intending to make any recommendations, would nevertheless trigger fiduciary status. 

Uncertainty over when the line would be crossed into investment advice would make it 

extremely difficult to serve their IRA customers, and may simply lead to a bank – (i) relying on 

the section 408(b)(4) exemption by placing IRA assets solely in bank deposit products, (ii) 

giving the customer the option to transfer to a higher-fee investment management advisory 

account, (iii) terminating the customer relationship, or (iv) refraining altogether from accepting 

any IRA business.

33

 Permitting retail transactions to come within the seller’s carve-out would 

not reduce consumer protections. Any such concerns could be addressed simply by prohibiting 

“boilerplate disclaimers” that the Department asserts could be used to avoid fiduciary status.

 

31 80 Fed. Reg. at 21,941.

32 Proposal § 2510.3-21(b)(1)(i)(B) & (C), 80 Fed. Reg. at 21,957.

33 See Sutherland Legal Alert at 9 (“The absence of a carve-out for IRA platforms, however, creates an ‘inadvertent 

fiduciary’ problem – the point at which the marketing of the platform crosses into fiduciary investment advice 

cannot be determined in advance with certainty – for which the proposed complex of exemptions may not provide a 

workable solution.”) [Emphasis added.]
19

Finally, under the Proposal, the counterparty carve-out is available only with respect to a sale, 

purchase, loan, or bilateral contract. Significantly, it is not clear whether the carve-out applies to 

services. Thus, the carve-out may mean that even incidental advice from a service provider that 

is specifically directed to the plan becomes fiduciary investment advice, even with the largest, 

most sophisticated clients. The counterparty carve-out, therefore, should be amended to clarify 

that it is available with respect to all services so that services/service arrangements are not 

inadvertently captured within the definition of investment advice.

2. Swap Transactions.

Under the Proposal, the swap and security-based transactions carve-out34 applies to 

communications in connection with swap transactions regulated under the Securities Exchange 

Act or the Commodity Exchange Act, if the conditions of the carve-out are met. The carve-out

applies only to plans that are represented by a fiduciary independent of the swap counterparty. It 

does not appear to apply to collective investment funds and other pooled funds that hold plan 

assets and that engage in swap and security-based transactions. This is an inconsistent result and 

disadvantages these types of funds that act as swap parties and counterparties. The Proposal, 

therefore, should be amended to permit collective investment funds and other pooled funds 

holding plan assets to rely on this carve-out.

3. Platform Provider and Selection and Monitoring Assistance.

The Proposal’s carve-outs for platform providers and related “selection and monitoring 

assistance” are intended to exempt retirement plan service providers who offer a platform of 

investment funds from which plan fiduciaries may choose a diverse line-up of investment 

options for their plans, as well as certain common activities that platform providers may carry 

out to assist plan fiduciaries in selecting and monitoring the investment alternatives that they 

make available to plan participants.35 The availability of this type of investment platform in the 

marketplace, however, is not limited to participant-directed defined contribution plans. Missing 

from the carve-out are plans whose investments are made, in whole or in part, directly by the 

plan fiduciary rather than by the plan participants. Platform providers should be able to provide 

their services to these plans on the same basis as provided to plans that are entirely participantdirected. 

The carve-out, therefore, should be amended to include not only participant-directed plans but all

plans where the investments are made directly by the plan fiduciary, including non-participantdirected defined contribution plans, participant-directed defined contribution plans that include 

contribution sources (e.g.. employer nondiscretionary contributions) that are invested by a plan 

fiduciary, defined benefit plans, and welfare benefit plans. Further, banks and other platform 

providers should be able to offer the same assistance to IRA owners to help them narrow the 

universe of available investment options on the platform, using objective criteria and tools.

 

34 See Proposal § 2510.3-21(b)(1)(ii), 80 Fed. Reg. at 21,957.

35 Proposal at § 2510.3-21(b)(4), 80 Fed. Reg. at 21,958.
20

4. Investment Education.

The Proposal provides a carve-out for the provision of investment materials to a retirement 

investor, provided that the materials do not include “recommendations with respect to specific 

investment products or specific plan or IRA alternatives, or recommendations on investment, 

management, or value of a particular security or securities, or other property.”36 The Proposal 

contrasts sharply with the Department’s Interpretive Bulletin 96-1 (Bulletin), which currently 

allows investment materials to include information on specific investment alternatives, provided 

the materials include a statement that information on other investment alternatives having similar 

risk and return characteristics may be available under the plan and identify where information on 

the alternatives may be obtained. The Department now proposes to replace the Bulletin with the 

substantially more restrictive Proposal. 

Although it believes that the framework under the Bulletin could be used to steer recipients to 

particular investments “without adequate protections against potential abuse,” the Department 

has not provided or referenced any evidence, statistics, or other data that show any such abuse in 

the marketplace. On the contrary, bank service providers have found that participants and IRA 

investors more clearly understand investments and investment alternatives when statistics and 

data on sample asset allocations and funds are shown. Customers have further appreciated and 

valued the ability to review illustrations of actual investments in order to recognize and 

understand particular investment strategies. If this meaningful investment education experience 

were removed, customers would be unlikely to see how particular investment and asset 

allocation strategies are actually applied. The Proposal’s goal to protect the retirement investor

would result in reduced investor education and understanding. Consequently, we request that the 

Department retain and incorporate into the Proposal’s carve-out for investor education the ability 

to reference specific investments. 

D. Procedural Issues.

1. Applicability Date.

The Proposal states that a final rule would be effective 60 days after publication and that the 

requirements of the rule would generally become applicable eight months after the final rule’s 

publication.37 The Department states that this “is intended to balance the concerns raised by 

commentators about the need for prompt action with concerns raised about the cost and burden 

associated with transitioning current and future contracts or arrangements to satisfy the 

requirements of the final rule and any accompanying prohibited transaction exemptions.”38 

Given the volume, complexity, and uncertainties of the Proposal, and its ambitious reformation 

and restructuring of entire portions of the retirement services industry, this is simply an 

unrealistic and unworkable deadline, more likely to work to reduce availability of services to

retirement investors where inadequate time is available for designing compliance regimes. 

 

36 Id.

37 Id. at 21,950.

38 Id.
21

In order to comply with the Proposal as written, affected banks would need to make business 

decisions that affect their entire line of retirement services, restructure that business, renegotiate 

and revise compensation packages and structures, renegotiate fee and service arrangements with 

third parties, create and implement bank policies and procedures, create and modify software and 

other technology systems to record, produce, and store significant amounts of new data, draft 

new contracts for IRA customers, and enter into contracts with all existing retirement customers. 

In addition, every current customer account would need to be reviewed, evaluated, and revised as 

necessary to take account of the Proposal’s requirements.39 All of this further would need to be 

consistent with current bank legal and regulatory requirements to which banks are subject. In 

light of the paradigmatic shift that the Proposal would impose on the delivery of retirement 

services, eight months not only is unrealistic but the proposed implementation timeframe also 

greatly underestimates the magnitude of resources, labor, and costs required for the retirement 

services industry to comply with the Proposal. The Department, therefore, should extend the 

applicability date by at least 36 months from the effective date of any final rule. 

2. Stay on Enforcement.

As noted above, under the Proposal, the rule’s requirements generally would become applicable 

eight months after the final rule’s publication. As it would likely take at least 36 months for 

banks to make all the necessary changes in order to ensure uninterrupted service to investors, we 

recommend that the Department provide a stay on enforcement of the Proposal for at least 36 

months from the effective date (which should extend to the Internal Revenue Service as well for 

purposes of Code section 4975). Given the liability risks for noncompliance under ERISA and 

the Code, the absence of any stay from enforcement likely would prompt a number of banks to 

consider partial or complete withdrawal from the retirement services market. 

3. Amendment of Existing Contracts.

The Proposal would require banks to amend significantly their existing contracts with customers 

in order to continue providing retirement products and services. This could involve contracts 

numbering in the thousands (or greater). In order to manage responsibly the tremendous burden 

this would place on bank staff, time, costs, and resources, we request that the Department permit 

banks and other product and service providers to use a “negative consent” approach to obtain 

customer approval of the amended contracts. This would involve notifying customers of all the 

changes effected by the final rule and informing them that all such changes to the contract will 

be deemed accepted by the customer unless the bank receives a written notice from the customer 

within a specified time period. This approach would facilitate the transition to the rule’s new 

requirements and ensure that customers are able to continue relying on their bank to provide their 

retirement services.

IV. Conclusion.

The Department has put forth a tremendous effort to improve the protection of the interests of 

plans and their participants and beneficiaries, and of the interests of IRA owners, as they work 

toward achieving a secure retirement. We appreciate and share the Department’s goal of 

 

39 Cf. Legal Memorandum from Davis & Harman LLP (Apr. 20, 2015).
22

providing individuals with the ability and means to maximize their retirement investment 

opportunities and returns. We believe, however, that the Proposal’s blanket restructuring of the 

marketing, products, services, compensation, and administration of the retirement services 

industry is a misguided approach fraught with significant risks, costs, and uncertainties for 

retirement investors and the firms that supply their services. 

Therefore, after the conclusion of hearings on the Proposal, the Department should withdraw the 

Proposal and consider how an amended Proposal might achieve its goals in a less intrusive

manner. Among other things, the amended Proposal should provide for a more precise and 

targeted definition of the term “fiduciary” that would exclude entities and activities, such as 

those described herein, that are generally considered by retirement investors to be outside the 

scope of the term. We would be glad to work with the Department as it evaluates how to 

improve the Proposal, consistent with the federal government’s priority that the rulemaking 

responds to a compelling need and offers the least burdensome tools to accomplish the 

Department’s objectives.

Thank you for your consideration of these views. If you have any questions or require any 

additional information, please do not hesitate to contact the undersigned at 202-663-5479

(tkeehan@aba.com).

Sincerely,

Timothy E. Keehan

Vice President & Senior Counsel