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September 23, 2015

Office of Regulations and Interpretations 

Employee Benefits Security Administration

Attn: Conflict of Interest Rule

Room N-5655

U.S. Department of Labor

200 Constitution Avenue NW

Washington, DC 20210

Office of Exemption Determinations

Employee Benefits Security Administration

Attn: D–11712

U.S. Department of Labor

200 Constitution Avenue NW, Suite 400

Washington DC 20210

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

Retirement Investment Advice

RIN 1210-AB32

Re: Proposed Best Interest Contract Exemption

ZRIN 1210-ZA25

Dear Madam or Sir:

The American Retirement Association (the “ARA”) thanks the Department of Labor (the 

“Department”) for the continued time and effort put into the initiative (the “Proposal”) to update 

and redefine fiduciary investment advice under section 3(21) of the Employee Retirement 

Income Security Act of 1974, as amended (“ERISA”). This letter is a follow-up to ARA’s 

original comment letter submitted on July 20, 2015 (the “July Letter”). 

The ARA proposed in its July Letter that the Department adopt a “Level-to-Level 

Exemption” that recognizes that Service Providers who are paid on a levelized basis and do not 

maintain the same conflicts of interest as those that the Department is seeking to address in the 

Best Interest Contract Exemption (the “BIC Exemption”) need exemptive relief that recognizes

their unique position.The BIC exemption balances the compelling need for investor protection 

with reasonable marketplace opportunities for Service Providers. These interests, however, are 

already well served in the relationship between investors and advisors who are free of conflicts. 

In particular, the Level-to-Level Exemption would provide relief to Service Providers who 

provide services to a plan or IRA in return for levelized compensation. In addition, the Level-toLevel Exemption would apply to the transfer of assets from a qualified plan to an IRA and the 
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subsequent investment of the assets held within the IRA as long as the Service Provider utilizes a 

levelized compensation model. The Level-to-Level Exemption would also apply to the transfer 

of assets from a tax-qualified plan to another tax-qualified plan.

The ARA, in this supplemental letter, desires to amplify and clarify two aspects of the 

Level-to-Level Exemption:

1) The Level-to-Level Exemption is critically necessary because the BIC 

exemption would be completely unavailable to a significant majority of advisers utilizing 

levelized compensation models since they have investment discretion over the accounts 

for which they provide services; and

2) The Level-to-Level Exemption, specifically should contain language (as 

clarified below) designed to impose a full ERISA section 404 standard on these 

unconflicted advisers to ensure that, even with their levelized compensation models, they 

are continuing to put their clients’ interests first – with the potential for enforcement 

action if they fail to live up to that standard.

I. The Need For the Level-to-Level Exemption

The ARA appreciates the significant efforts the Department has put into the BIC 

Exemption and its careful consideration of the numerous suggestions made at the August 2015 

hearings. As noted in the July Letter, there are four key reasons why the Department should 

incorporate the Level-to-Level Exemption into its final rulemaking process. Without repeating 

these key reasons, the ARA wishes to again emphasize that the BIC Exemption addresses 

concerns about potential conflicts in a way that, with respect to advisers utilizing a levelized 

compensation model, is at best highly burdensome and at worst holds the potential to cripple the 

practices of many unconflicted advisers. 

In addition, the BIC Exemption is unavailable to a Service Provider who: exercises any 

discretionary authority or discretionary control regarding management of the Plan or IRA, or the 

disposition of assets; or has any discretionary authority or responsibility in the administration of 

the Plan or IRA.1It is understandable why this exclusion is included in the BIC Exemption. In 

the context of the Level-to-Level Exemption, however, it is an unnecessary impediment to 

providing participants with the information needed to make informed decisions on rollovers, 

post-rollover investment decisions as well as other investment decisions for covered accounts.

Under the proposed Level-to-Level Exemption, Service Providers would be unconflicted 

in exercising such discretion since their compensation would remain level irrespective of the 

investments selected or the discretion that could be exercised. This situation is in stark contrast 

to the BIC Exemption which permits differential compensation.In the absence of the exclusion, 

differential compensation could be received as a result of the exercise of such discretion. The 

BIC Exemption exclusion thus makes sense to stem this potential for abuse. The Level-to-Level 

Exemption, with the constraints and fiduciary responsibilities proposed, is not subject to this 

abuse potential. To the contrary, it ensures that Service Providers, who often exercise discretion,

 

1 BIC Exemption § I(c)(4).
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do so in an unconflicted manner. It is for this reason that the Level-to-Level Exemption is

necessary as an additional alternative to the BIC Exemption. Otherwise, a significant majority of 

unconflicted advisers will be completely prohibited from working with participants on rollover 

transactions, precluding participants from working with advisers they have grown to trust.

II. ERISA Duties of Prudence and Loyalty

 As set forth in the July Letter, the proposed Level-to-Level Exemption includes a 

condition that Service Providers utilizing the exemption would be required to represent in the 

agreement with the Retirement Investor that the Service Provider will operate in accordance with 

ERISA’s section 404 prudence standards. As described in the July Letter, the ARA agrees with 

the Department that a high standard of conduct should apply to Service Providers that advise and 

manage the assets of American workers. However, the ARA remains concerned that courts will 

interpret the “Best Interest Standard” included in the BIC Exemption inconsistently with 

ERISA’s standard of care. The ARA also maintains that it is important to articulate a standard 

that is widely known and understood by both marketplace participants and the courts to avoid 

any potential confusion between the standard of care known to the industry and the standard 

ultimately applied by the courts.

The ARA understands that, as proposed in the July Letter, the ARA’s suggested standard 

of care in the proffered Level-to-Level Exemption may appear to only include ERISA’s duty of 

prudence and not ERISA’s duty of loyalty (which was not intended). To address this potential 

concern, the ARA proposes to modify and clarify the proposed Level-to-Level Exemption in two 

parts:

First, Section (a)(2)(C) would be modified as follows:

(2) (C) ERISA Section 404. The Service Provider represents within the 

agreement described in section (2)(B) of this section that the 

Service Provider will discharge his duties with respect to an IRA 

or a plan:

(1) solely in the interest of the Retirement Investor and for the 

exclusive purpose of (i) providing benefits to the 

Retirement Investor and their beneficiaries, and (ii)

defraying reasonable expenses of administering the IRA or 

the plan.

(2) with the care, skill, prudence, and diligence under the 

circumstances then prevailing that a prudent man acting in 

a like capacity and familiar with such matters would use in 

the conduct of an enterprise of a like character and with 

like aims.

Second, Section 4(A) would be modified as follows:
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(4) (A) Documentation of ERISA 404. To the extent a rollover transaction 

occurs, for a period of six years after the transaction, the Service 

Provider must maintain documentation that a rollover transaction 

was made in a manner consistent with ERISA section 404. Such 

documentation shall include a description that the recommendation 

satisfies the ERISA section 404 obligations of prudence and 

loyalty to the Retirement Investor based on information about the 

options obtained through reasonable diligence, and taking into 

account factors such as tax implications, legal ramifications, and 

differences in services, fees and expenses between the retirement 

savings alternatives. 

The ARA appreciates the ongoing opportunity to work with the Department on these

issues of great importance to our diverse membership of retirement marketplace participants. 

We would welcome the opportunity to discuss these comments further with you. Please contact 

Craig Hoffman, ARA General Counsel, at CHoffman@USARetirement.org with respect to any 

questions regarding the matters discussed herein. Thank you for your time and consideration.

Sincerely,

/s/

Brian H. Graff, Esq., APM

Executive Director/CEO

American Retirement Association

/s/

Judy A. Miller, MSPA

Executive Director, ACOPA

/s/

Craig P. Hoffman, Esq., APM

General Counsel

American Retirement Association

/s/

Thomas J. Finnegan, MSPA, CPC, QPA

President

American Retirement Association

/s/

Marcy L. Supovitz, CPC, QPA, QKA

President-Elect

American Retirement Association