Office of the General Counsel

John S. Watts
Senior Vice President &
Associate General Counsel

@® PRIMERICA

Primerica
3120 Breckinridge Boulevard
Duluth, GA 30099-0001

770-564-7613 Phone
February 8, 2011 770-923-4239 Fax

johnwatts@primerica.com

Via Electronic Mail to e-ORI@dol. gov

Office of Regulations and Interpretations
Employee Benefits Security Administration

Attn: Fiduciary Definition Hearing, Room N-5655
U.S. Department of Labor

202 Constitution Avenue, NW

Washington, DC 20210

Re: Fiduciary Definition Hearing
Dear Mr. Wong and Ms. Grillo-Chope:

This request to testify at the above-noted hearing is submitted by PFS Investments
Inc. (“PFSI”), a registered broker-dealer and an indirect wholly-owned subsidiary of
Primerica, Inc. (“Primerica”), a financial services company that is publicly-traded on the
NYSE! PFSI has filed a comment regarding the U.S. Department of Labor’s
(“Department”) proposal to amend the definition of “fiduciary” (“Proposal”) that
expresses in detail our concern that the proposed definition, as applied to Internal
Revenue Code § 4975, would have serious adverse consequences for middle-income
consumers attempting to save for retirement or their children’s education. The following
are some of the key topics that PFSI would like to address at the hearing.

" Middle-income consumers, defined by us to include households with $30,000 to
$100,000 in annual income, represent approximately 50% of all U.S. households.
It is widely acknowledged that insufficient retirement savings among middle-
income consumers has reached a critical level.

= Commission-based individual retirement accounts (“IRA”) are a popular choice
for middle-income consumers saving for retirement.

= The Proposal will make broker-dealers that serve the IRA market “fiduciaries”
and subject to the prohibited transaction rules of IRC § 4975(c)(1)(E) and (F).
Application of those rules to broker-dealers would substantially undermine their
ability to receive and retain certain types of compensation paid by third parties
(product providers and their affiliates) in connection with transactions involving
assets in IRAs and Coverdell education savings accounts (“Coverdells”).

' Under the ticker symbol “PRI.”

Primerica Companies Primerica Life PFS Investments inc. Primerica Financial Services
Insurance Company Member FINRA Home Mortgages, nc.
Equal Housing Opportunity


Office of Regulations and Interpretations
Employee Benefits Security Administration
Fiduciary Definition Hearing

February 8, 2011

Page 2 of 3

= Because PFSI, and we believe other firms, that endeavor to serve the middle-
income market, depend on such compensation to help defray the costs of
delivering services to their customers, PFSI and such other firms would be
required to substantially restructure their businesses to account for the loss of such
revenue.

= Without such revenue, some broker-dealers that serve the middle-income market
would have to raise account minimums and significantly increase account fees for
IRAs and Coverdells. Others may simply choose to stop providing services to this
already underserved market. These actions would further limit the options open
to middle-income consumers attempting to save for retirement or the education of
their children.

= With the curtailment of the commission-based IRA account, many middle-income
consumers will turn to fee-only advisory services. But because fee only
investment advisers typically require higher minimum account balances than
commission-based IRAs, many middle-income consumers will be unable to
access their services.

= For many middle-income consumers that are buy-and-hold investors, a fee-only
advisory service will often prove to be a more expensive investment alternative.

= For these reasons, it is our view that the Proposal would end up substantially
reducing the investment options available to middle-income retail consumers for
their retirement and educational savings and have the unintended consequence of
exacerbating the national crisis that is the lack of sufficient retirement savings
among middle-income consumers.

= Because of the SEC’s ongoing efforts to harmonize the standard of care between
broker-dealers and investment advisers, adopting the Proposal without
coordinating with the SEC could lead to confusion and widespread disruption in
the IRA marketplace.

= To protect the interests of middle-income consumers, we urge the Department to
carve out IRAs and Coverdells from the Proposal, and then to coordinate with the
SEC in an effort to determine whether it is in the best interests of consumers to
harmonize the treatment of these accounts with the most recent expression of
Congressional intent, set forth in section 913 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010.


Office of Regulations and Interpretations
Employee Benefits Security Administration
Fiduciary Definition Hearing

February 8, 2011

Page 2 of 3

Given the substantial impact of the Proposal, PFSI applauds the Department’s
decision to hold a hearing and provide a forum for the many concerned stakeholders to
participate in the rulemaking process. Peter Schneider, General Counsel of Primerica,
and I look forward to the opportunity to testify and offer recommendations that we
believe will advance the goal of protecting investors without restricting cost-effective
access to brokerage services and investment advice for middle-income families. Thank
you for your consideration of our request.

VOOR Yours,
fohn S. Watts
Senior Vice President & Chief Counsel
PFS Investments Inc.

Phone: 770-564-7613
Email: john.watts@primerica.com