February 2, 2011 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Attn: Definition of Fiduciary Proposed Rule 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Re: Comments on Proposed Definition of Fiduciary (RIN 1210-AB32)

Ladies and Gentlemen: 

The ERISA Industry Committee (“ERIC”) is pleased to submit these comments 

on the proposal to change the definition of the term “fiduciary.” The proposal is set forth 

in a proposed regulation that was published in the Federal Register on October 22, 2010. 

ERIC is a nonprofit association committed to the advancement of the employee 

retirement, health, incentive, and welfare benefit plans of America’s largest employers. 

ERIC’s members provide comprehensive retirement, health care, and other economic 

security benefits directly to tens of millions of active and retired workers and their 

families. ERIC has a strong interest in proposals affecting its members’ ability to deliver 

attractive benefits efficiently. 

ERIC understands the Department’s desire to update the definition of “fiduciary” 

to reflect changes in the retirement plan community and financial marketplace since 

1975. ERIC supports clear guidelines to ensure that persons who provide investment 

advice to plan fiduciaries and/or participants and beneficiaries are subject to ERISA’s 

fiduciary standards. However, before significantly broadening the scope of the fiduciary 

definition, the Department should consider carefully the unintended consequences that 

can result from swinging the pendulum too far in the other direction. 

In particular, it is important to take into account the costs that service providers 

who are treated as fiduciaries are likely to pass through to plans. These costs might 

include, for example, new insurance costs and a fee premium for being exposed to new 

legal risks. ERIC is also concerned that if the fiduciary definition is broadened too much, 

the risk of liability might cause well-intentioned stakeholders to refrain from providing 

informal assistance to plan participants, beneficiaries, and others who are in need. In 

addition, the final regulation should be clarified to ensure that common transactions do 

not become prohibited as a result of adverse parties being treated as fiduciaries, and that 

the new fiduciary definition does not apply with respect to advice provided before the 

final regulation becomes effective. 

1400 L Street, N.W. 

Suite 350 

Washington, DC 20005 

T (202) 789-1400 

F (202) 789-1120 

www.eric.org 

The 

ERISA 

Industry 

Committee 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 2 of 10

Summary of Comments 

1. ERIC recommends the following changes to ensure that well-intentioned stakeholders can 

offer informal assistance without the risk of fiduciary liability:

a. The final regulation should include a safe harbor for advisers whose principal 

responsibilities do not include providing investment advice. These advisers should 

not be treated as fiduciaries if they indicate orally or in writing the scope of their role 

and that they are not investment advisers and are not undertaking to provide 

investment advice. See Part 1.a, beginning on page 3, below. 

b. The proposal to apply fiduciary standards to advice provided “pursuant to an 

agreement, arrangement or understanding . . . that such advice may be considered in 

connection with making investment or management decisions” should be changed to 

apply only if there is a “mutual agreement, arrangement or understanding . . . that 

such advice will be a material consideration in a pending investment or management 

decision.” See Part 1.b, beginning on page 4, below. 

c. The final regulation should clarify that the “for a fee” condition is not satisfied unless 

(i) the adviser is engaged and paid to provide investment advice, or (ii) the adviser’s 

compensation will be affected if the investment advice is followed. See Part 1.c, 

beginning on page 5, below. 

d. A fiduciary who is not responsible for providing investment advice should not be 

treated differently than anyone else who is not responsible for investment advice. See

Part 1.d, on page 6, below. 

2. Advice on whether to take a distribution should be treated like investment advice if (and only 

if) the advice is provided by an adviser who (a) is engaged before the distribution occurs for 

his or her investment or financial planning expertise, or (b) stands to gain from an investment 

decision related to the distribution. See Part 2, beginning on page 6, below. 

3. With respect to any transaction, a person whose interests are adverse to the plan (or a 

participant or beneficiary) should not be treated as a fiduciary if he or she has taken 

reasonable steps to ensure that the recipient of the advice knows that the adviser is not 

undertaking to provide impartial investment advice. See Part 3, beginning on page 7, below. 

4. Appraisals and fairness opinions should not be treated like investment advice unless (a) the 

appraisal or fairness opinion relates to a plan asset or property that will become a plan asset if 

it is purchased, and (b) there is a mutual understanding that the fairness opinion will be relied 

upon in a decision to buy or sell the property. See Part 4, beginning on page 8, below. 

5. The final regulation should state expressly that it may not be taken into account with respect 

to advice provided before the effective date of the final regulation. See Part 5, beginning on 

page 9, below. 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 3 of 10

Discussion 

1. Informal Assistance vs. Investment Advice 

ERIC understands the Department’s concern that the existing definition of “fiduciary” might 

be too narrow. However, ERIC is concerned that if the definition is broadened too much, the fear of 

fiduciary liability will chill well-intentioned stakeholders’ willingness to help others. As outlined 

below, ERIC recommends four changes to avoid this unintended consequence.

a. Safe Harbor for Advisers Who Do Not Undertake to Provide Investment Advice 

The final regulation should include a safe harbor carve-out that applies if the following 

conditions are satisfied: 

i. The adviser’s principal responsibilities do not include providing investment advice; 

and 

ii. The adviser indicates orally or in writing— 

 The scope of the adviser’s role, and 

 That he or she is not an investment adviser and is not undertaking to provide 

investment advice. 

This safe harbor is an appropriate extension of the carve-outs in Section 2550.3-21(c)(2) of 

the proposed regulation. The following examples illustrate the safe harbor: 

 Example 1. Employer maintains a call center for participants with questions about 

Employer’s participant-directed section 401(k) plan. Call center representatives are not 

responsible for providing investment advice, and are not authorized to provide investment 

advice. Rather, call center representatives are responsible for answering questions about 

how the plan works, such as how to make deferral elections, the plan’s rules for taking a 

distribution, and where to find information about the plan’s investment options. 

Participant asks a call center representative whether the LMNO investment option is a 

good investment, and the representative gives an unauthorized answer. The 

representative’s employer and plan sponsor should not be subject to fiduciary liability if 

the materials informing participants about the call center describe the purpose of the call 

center, and state that the call center is not a source of investment advice and should not be 

used as such. 

 Example 2. Attorney advises Employer on fiduciary issues related to Employer’s plan. 

In the course of advising Employer, attorney recommends that Employer engage an 

investment manager. Attorney states that ABC Managers has an excellent reputation and 

suggests that Employer interview ABC Managers. If Attorney has made clear that she 

does not intend to provide investment advice, suggesting that Employer interview ABC 

Managers should not make Attorney a fiduciary. 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 4 of 10

 Example 3. Employer distributes to plan participants a monthly newsletter with 

information about Employer’s participant-directed savings plan. One newsletter includes 

a letter from the manager of the plan’s stable value fund, stating that the stable value fund 

is a safe investment. Another newsletter includes a report by a research firm with a sell 

rating on one of the plan’s investment options. If the newsletters state that they should 

not be treated as investment advice, the employer should not be treated as a fiduciary 

solely by reason of passing along the investment information. 

In each of the examples, the carve-out for investment education, the requirement that 

investment advice be individualized, and/or the requirement that investment advice be provided for a 

fee (see Part 1.c, below) might be sufficient to ensure that the well-intentioned adviser is not treated 

as a fiduciary. However, in light of the consequences that can result from a misunderstanding or an 

inadvertent mistake, and the lack of a bright line between investment advice and investment 

education, ERIC respectfully requests a safe harbor to help stakeholders stay on the intended side of 

the line. 

A safe harbor would also improve the quality and consistency of advice, increase 

compliance, and protect the recipients of advice and other information. First, well-intentioned 

stakeholders who do not hold themselves out as investment advisers will have clear guidelines on the 

extent to which they can offer informal assistance without being subject to fiduciary liability. 

Second, advisers who are not willing to take the steps required to fit into the safe harbor will be 

compelled to satisfy the fiduciary standards. 

b. Reasonable Boundaries for the Proposed “May Be Considered” Standard 

The proposed regulation would replace a requirement that investment advice be provided— 

“on a regular basis . . . pursuant to a mutual agreement, arrangement 

or understanding . . . that such [advice] will serve as a primary basis

for investment decisions” . . . 

 with a requirement that the investment advice merely be provided— 

“pursuant to an agreement, arrangement or understanding . . . that such 

advice may be considered in connection with making investment or 

management decisions.” 

(Emphasis added.) 

ERIC understands the Department’s concern that the existing “regular” and “primary” basis 

requirements may exclude significant advice provided on major transactions. However, the 

proposed standard is deficient in two significant ways: 

i. The “may be considered” standard is too broad. All advice, even an off-the-cuff 

answer to an informal question, “may be considered.” 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 5 of 10

ii. Eliminating the term “mutual” from the phrase “mutual agreement, arrangement or 

understanding” can make a well-intentioned adviser responsible for a 

misunderstanding. For example, suppose that the attorney described in Example 2, in 

Part a, above, told Employer that she would not be providing investment advice, but 

Employer nevertheless claims that it understood Attorney’s recommendation to 

interview ABC Managers to be advice that may be considered in connection with 

making the investment decision. This kind of misunderstanding should not make 

Attorney a fiduciary. 

In order to address these concerns, ERIC proposes revising the relevant phrase in proposed 

Section § 2510.3-21(c)(1)(i)(D) by adding back the word “mutual” and adding a materiality 

standard. The following phrase would be more appropriate: 

“ . . . pursuant to a mutual agreement, arrangement or 

understanding . . . that such advice will be a material consideration in 

a pending investment or management decision . . . .” 

This language would resolve the Department’s concerns with the existing “regular” and “primary” 

basis standard, without sweeping in informal advice that is not intended to be relied upon. 

If the Department nevertheless concludes that the word “mutual” must be removed from the 

regulation, the final regulation should at least include a requirement that the understanding be 

reasonable. The final regulation should also include a safe harbor standard for a well-intentioned 

service provider to avoid becoming a fiduciary as a result of a misunderstanding. The safe harbor 

standard described in Part a, above, would achieve this objective. 

c. Linking Fee With Advice 

ERIC understands that fees for investment advice are not limited to direct fees. However, the 

final regulation should clarify that the “for a fee” condition is not satisfied unless either (i) the 

adviser is engaged and paid to provide investment advice, or (ii) the adviser’s compensation will be 

affected if the investment advice is followed. 

For example, if a financial planner’s compensation is based on assets under management, or 

the adviser receives commissions from funds in which the advisee’s account is invested, the “for a 

fee” condition is clearly satisfied. In contrast, however, if a call center employee receives a salary 

for answering questions about the plan, and investment advice is not in the employee’s job 

description, the employee’s salary should not be taken into account for purposes of determining 

whether investment advice is provided for a fee. 

Similarly, the final regulation should clarify that a salary paid to an employee responsible for 

providing research support to a plan’s investment fiduciaries is not taken into account for purposes 

of determining whether any investment advice is provided for a fee. For example, suppose that a 

defined benefit plan’s governing documents designate an investment committee as the fiduciary 

responsible for investing plan assets, and the investment committee relies on a salaried employee of 

the plan sponsor to research various investment alternatives. The employee is not authorized to 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 6 of 10

make investment decisions. The employee’s salary should not be treated as a fee for providing 

investment advice. 

d. Fiduciaries Who are Not Responsible for Investment Advice 

Proposed Section 2510.3-21(c)(1)(ii)(B) provides that if an individual is a fiduciary for a 

reason unrelated to providing investment advice (e.g., because the individual exercises discretionary 

authority or control with respect to management or administration of the plan), the individual will 

automatically be treated as a fiduciary with respect to investment advice. 

The mere fact that an individual is a fiduciary for one reason does not automatically make the 

individual a fiduciary for another reason. ERISA § 3(21)(A) makes clear that a person is a fiduciary 

only “to the extent” that he renders investment advice for a fee. Taking into account responsibilities 

unrelated to investment advice would be inconsistent with the well-settled principle that a fiduciary 

who wears two hats wears only one hat at a time. See, e.g., Pegram v. Hedrich, 530 U.S. 211, 225-

26 (2000) (citing Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443-44 (1999); Varity Corp. v. 

Howe, 516 U.S. 489, 497 (1996)). 

For example, fiduciaries who are responsible for plan administration typically oversee the 

drafting of summary plan descriptions and other communications. It is common for these materials 

to include descriptions of investment alternatives that are provided by the fund managers; and the 

descriptions often include statements under headings like “who might want to invest in this fund.” If 

the communication states that it should not be treated as investment advice, the fiduciaries 

responsible for the communication should not be treated like investment advisers merely because 

they are passing along information from the fund managers. 

Similarly, suppose that a plan participant asks the plan administrator whether the plan’s 

balanced fund is a good investment option. The final regulation should include a standard under 

which the administrator can be assured that providing a reasonable answer (e.g., “I am not 

responsible for reviewing the plan’s investment options, but I know that the balanced fund was 

designated as the plan’s default investment alternative”) will not subject the plan administrator to the 

same fiduciary scrutiny as a designated investment adviser. 

The safe harbor standard described in Part a, above, would achieve this objective. 

2. Advice on Whether to Take a Distribution 

A routine recommendation to take a distribution or roll over an account balance to an IRA or 

another employer’s plan should not be treated as investment advice. However, if the advice is 

provided by an adviser who is engaged before the distribution occurs for his or her investment or 

financial planning expertise, or who stands to gain from an investment decision related to the 

distribution, the adviser should be treated as a fiduciary. 

For example, suppose that Plan’s investment lineup includes the XYZ Fund, which invests in 

mid-cap stocks. Plan’s fiduciaries recently added a new mid-cap fund and decided to restrict future 

transfers into the XYZ Fund. After this decision is implemented, Employee calls Plan’s call-center 

and requests to transfer part of Employee’s account balance to the XYZ Fund. The operator explains 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 7 of 10

that Plan no longer allows transfers into the XYZ Fund and then tells Employee that if she wants to 

invest in the XYZ Fund, she can do so by rolling over her balance to an IRA with Acme Bank. 

Providing this information should not make the operator a fiduciary. 

In contrast, suppose that Employee has a right to choose between an annuity and a lump-sum 

distribution, and Employee has engaged Financial Adviser to help with the decision. Financial 

Adviser recommends taking a lump sum and engaging Best Investors to invest the proceeds, because 

Best can outperform the assumptions underlying the annuity calculation. Financial Adviser should 

be treated as a fiduciary, because the advice relates to investment of a plan asset and Financial 

Adviser has been engaged for her expertise. Similarly, if Best reaches out to Employee to solicit her 

business, Best should be treated as a fiduciary, because Best stands to gain from an investment 

decision related to Employee’s distribution decision. (As described in Part 3, below, Best could 

avoid fiduciary liability if it takes steps to make sure that Employee knows or reasonably should 

know that Best’s interests are adverse.)1

3. Persons With Adverse Interests 

The proposed regulation appropriately recognizes that a person whose interests are adverse to 

a plan or its participants or beneficiaries should not be treated as a fiduciary if the recipient of the 

advice or recommendation knows or reasonably should know the person’s adverse status. See 

Proposed § 2510.3-21(c)(2)(i), (ii)(B) & (C). The final regulation should clarify that this carve-out 

applies with respect to any activity described in Proposed Section 2510.3-21(c)(1)(i), and without 

regard to the nature of the transaction. 

For example, in the context of a swap or a real estate or private equity transaction, parties on 

the other side of the transaction often produce valuations and fairness opinions. The carve-out 

should cover providing this information. If simply providing a valuation or similar information 

could make the party a fiduciary, it would be almost impossible to avoid being on both sides of the 

transaction. As a result, many common transactions that are in the best interests of participants and 

beneficiaries would be prohibited by ERISA. 

This issue was raised during the development of the Dodd-Frank Act, when a Senate bill 

assigned fiduciary responsibilities to swap dealers engaging in transactions with employee benefit 

plans. In order to avoid putting swap dealers on both sides of the transaction, the bill was revised to 

provide that swap dealers who are not acting as advisors do not have fiduciary responsibilities to 

plans. However, the Dodd-Frank Act still requires swap dealers to provide plans with daily marks 

(i.e., valuations) of their swap investments. If a mark report is treated as investment advice, adverse 

swap dealers would end up on both sides of the transaction and almost every swap would be a 

prohibited transaction. 

 

1

 We understand that the Department is considering expanding on the guidance in Interpretive 

Bulletin 96-1 to cover retirement income planning, including distribution decisions. ERIC supports 

this effort. 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 8 of 10

In order to avoid a de facto prohibition of common transactions, the final regulation should 

clarify that no action described in Proposed Section 2510.3-21(c)(1)(i) would result in a person 

being treated as a fiduciary if the recipient of the advice or other information knows, or under the 

circumstances reasonably should know, that the person providing the advice or other information is 

on the other side of the transaction. The final regulation should also state that providing the 

disclosure required by Section 4s(h)(5)(A)(ii) of the Commodity Exchange Act (as amended by the 

Dodd-Frank Act) is sufficient to demonstrate that the recipient of the advice or other information 

reasonably should know that the person providing the advice or other information is on the other side 

of the transaction. 

A safe harbor standard for imputing knowledge to recipients of information will improve the 

level of compliance and protect the recipients of information. Parties that intend to be adverse to one 

another will have certainty on how to achieve their objectives; and advisers who are not willing to 

disclose their status will be compelled to satisfy the fiduciary standard. 

4. Appraisals and Fairness Opinions 

ERIC agrees that appraisals and fairness opinions are often relied upon when making 

investment decisions, and that appraisals and fairness opinions should be provided in good faith and 

based on a prudent investigation of the prevailing circumstances. However, there are many cases in 

which it is unnecessary to treat an appraisal or fairness opinion like investment advice. ERIC is 

concerned that subjecting service providers to fiduciary standards in those cases would unnecessarily 

increase the cost of delivering benefits to participants and beneficiaries. 

The proposed carve-out for general reports and statements that are provided to comply with 

reporting and disclosure requirements is too narrow. Rather than establish a sweeping rule with a 

narrow carve-out, the Department should craft a more narrow rule that directly addresses the 

Department’s specific concern. 

Specifically, an appraisal or fairness opinion should not be treated like investment advice 

unless (a) the appraisal or fairness opinion relates to a plan asset or property that will become a plan 

asset if it is purchased, and (b) there is a mutual understanding that the appraisal or fairness opinion 

will be relied upon in a decision to buy or sell the property. The rule should also make clear that 

simply aggregating valuations of assets that are not plan assets (and will not be plan assets upon 

purchase of a fund interest) is not a fiduciary act. 

For example, it might be appropriate to treat an appraisal or fairness opinion that is used as 

the basis for an ESOP’s purchase of stock in a private company as investment advice. The same 

might be true for an appraisal of real estate that the plan wishes to purchase or sell. 

In contrast, however, the economics of many investments in unregistered funds depend on 

the expectation that if the fund’s underlying assets are not plan assets under 29 C.F.R. § 2510.3-101, 

the fund manager will not be a fiduciary to the plan. In the normal course of business, fund 

managers provide periodic statements with valuation information. Merely providing these 

statements, or appraising the underlying assets (which are not plan assets), should not change the 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 9 of 10

fund manager’s status. Existing standards for the fiduciaries of plans that invest in the fund are 

sufficient to protect the interests of plan participants and beneficiaries. 

Similarly, as noted above, providing daily mark reports to plans that invest in swaps should 

not result in a swap dealer being treated as a fiduciary. 

If the final regulation retains the rule that appraisals and fairness opinions may be treated as 

investment advice, the Department should issue a prohibited transaction exemption to prevent 

appraisers from being disqualified merely because they are affiliated with parties to the transaction. 

For example, many qualified real estate appraisers are affiliated with real estate firms that could be 

parties to transactions with plans. If these appraisers are automatically disqualified out of prohibited 

transaction concerns, it might be difficult to obtain quality appraisals at a reasonable cost. A 

reasonable prohibited transaction exemption would prevent this result, while at the same time 

specifying standards to ensure that the appraiser’s judgment is not impaired by a potential conflict.

5. Effective Date 

As the Department has acknowledged, the proposed regulation would significantly change a 

rule that has been in effect for 35 years, establishing new circumstances under which service 

providers are subject to ERISA’s fiduciary responsibilities. 75 Fed. Reg. at 65265. Although we 

understand that the Department now believes it is appropriate to make a change, service providers 

and other stakeholders have relied on the existing interpretation of the statute for over 35 years.2

Consistent with the significance of the change, the Department has proposed a prospective 

effective date—180 days after the final regulation is published in the Federal Register—for its new 

interpretation of the statute. 75 Fed. Reg. at 65269. However, the proposed regulation does not 

expressly foreclose referring to the new regulation as persuasive authority with respect to advice 

provided before the effective date. 

In light of the unique responsibilities that go along with being treated as a fiduciary—

responsibilities that advisers acting outside the scope of the existing regulation reasonably believed 

that they did not have—the final regulation should state expressly that the Department’s new 

interpretation of the statute may not be taken into account with respect to advice, recommendations, 

or other information provided before the effective date. For example, if a claim brought after the 

effective date of the new regulation relates to advice given before the effective date, the new 

 

2 See, e.g., Schloegal v. Boswell, 94 F.2d 266, 272-73 (5th Cir. 1993) (applying the existing 

regulation to determine whether an individual who provided advice was a fiduciary); Glaziers & 

Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Sec., Inc., 93 F.3d 1171, 1179 (3d 

Cir. 1996) (referring to the existing regulation to “clarify” what it means to “render investment 

advice”). 
The ERISA Industry Committee February 2, 2011 

Comments on Proposed Definition of Fiduciary (RIN 1210-AB32) Page 10 of 10

regulation should not be taken into account for purposes of determining whether the advice was 

provided by a fiduciary.3

Notwithstanding the Department’s concerns with the existing regulation, service providers 

who relied on the existing regulation in good faith should not be exposed to potential liability for 

advice provided when the existing regulation was in effect. 

* * * * * 

ERIC appreciates the opportunity to submit these comments. If we can be of further 

assistance, please let us know. 

Sincerely, 

Mark J. Ugoretz 

President & CEO 

 

3 See generally, e.g., Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208-09 (absent an express 

statutory grant of retroactive rulemaking authority, administrative rules should not be given 

retroactive effect); Health Ins. Ass’n of Am., Inc. v. Shalala, 23 F.3d 412, 423-25 (D.C. Cir. 1994), 

cert. denied 513 U.S. 1147 (1995) (like legislative rules, interpretive rules should not be given 

retroactive effect); Nat’l Mining Ass’n v. DOL, 292 F.3d 849, 859, 864-65 (D.C. Cir. 2002) (new 

interpretation of existing rule should not apply with respect to transactions occurring before effective 

date).