SHAPING AMERICA’S RETIREMENT

 

Submitted Electronically

February 2, 2011 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW 

Washington, DC 20210 

Re: Definition of Fiduciary Proposed Rule

Ladies and Gentlemen: 

The SPARK Institute, Inc.1 appreciates this opportunity to comment on the Employee Benefits 

Security Administration’s (“EBSA”) definition of fiduciary proposed rule (the “Proposal”).2 The 

SPARK Institute supports EBSA’s objective of clarifying the scope of the definition of fiduciary 

under the Employee Retirement Income Security Act of 1974 (“ERISA”) to include certain plan 

service providers and to help plan sponsors understand whether or not their service providers are 

acting in a fiduciary capacity. However, we are concerned that the Proposal may have 

significant unintended consequences that will adversely affect the products and services that are 

available to retirement plans and may severely limit plan sponsors’3

 ability to cost effectively get 

the information and support they need with respect to their plan investment options. This letter 

includes a summary of our concerns regarding the Proposal and suggests certain modifications. 

 

1

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

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

administrators, trade clearing firms and benefits consultants. Members include most of the largest firms that 

provide record keeping services to employer-sponsored retirement plans, ranging from one-participant programs 

to plans that cover tens of thousands of employees. The combined membership services approximately 70 

million employer-sponsored plan participants.

2

 75 Fed. Reg. 65263 (Oct. 22, 2010).

3

 For purposes of simplicity, references herein to the plan sponsor include a plan committee acting on behalf of 

the plan, plan trustee or other plan fiduciary that is designated as being responsible for selecting a plan’s 

investment options. 
SHAPING AMERICA’S RETIREMENT 2

Additionally, EBSA requested comments regarding distribution counseling services. The 

SPARK Institute believes that non-fiduciary distribution counseling services are a valuable tool 

for plan sponsors and participants that should be preserved. Accordingly, this letter includes our 

views on that subject. 

 

I. Executive Summary

The following is a summary of the various requests and recommendations made in this 

letter. 

A. Definition of Fiduciary - General Concerns (Section II, A) – We urge EBSA to take 

a more measured and restrained approach in changing the definition of investment 

advice and fiduciary so that it and the entire retirement plan community can evaluate 

the implications for everyone affected. If EBSA decides to proceed with expanding 

the definition of a fiduciary, we urge it to consider the following recommendations 

that can form the basis for modifications to the Proposal or a safe harbor under the 

final rule. 

1. Unless a service provider has or exercises discretion with respect to plan assets, 

the service provider and a plan, plan sponsor, plan participant or beneficiary 

should be permitted to agree upon and define, in writing, the service provider’s 

role and whether a fiduciary relationship is intended or expected and, if so, the 

scope of that fiduciary relationship. 

2. Any written agreement regarding a service provider’s role as a fiduciary or nonfiduciary should include an express statement that the products and services are 

not investment advice or fiduciary service, except as specifically provided 

otherwise in the agreement. 

3. The service provider should disclose in any such agreement and consistent with 

the regulations under Section 408(b)(2) of ERISA, the financial interests it may 

have regarding any decisions that the plan, plan sponsor, plan participant or 

beneficiary may make in connection with the plan and plan assets. 

4. A service provider should be permitted to provide advice, recommendations, and 

information to a potential customer during the sales process if the selling party 

expressly discloses that the seller is providing such in a non-fiduciary capacity as 

a seller and that it has a financial interest regarding any decisions that the 

potential customer may make in connection with the plan and plan assets. 

B. Definition of Fiduciary - Unintentional Fiduciary Status of Certain Investment 

Adviser Affiliates (Section II, B) – We urge EBSA to modify the language in the 

Proposal to clarify that merely being affiliated with an Investment Adviser will not 

cause a service provider to be treated as having rendered investment advice, and that 

such service provider will only be treated as having rendered investment advice if it 

meets one of the other requirements under Section (c)(1)(ii). 
SHAPING AMERICA’S RETIREMENT 3

C. Investment Platform Exception (Section II, C) – We recommend that EBSA clarify 

or modify the Proposal in the following ways. Service providers should be permitted 

to make recommendations and provide information to a plan, plan sponsor, participant 

and beneficiary about plan investment options in a non-fiduciary capacity provided 

that any such assistance is based on “objective criteria” including criteria 

recommended by the service provider, and provided further that the service provider 

discloses that the assistance is not intended to be advice, that the service provider is 

not acting in a fiduciary capacity, that the service provider may have a financial 

interest regarding the decisions that are made (if applicable), and that the recipient is 

ultimately responsible for making the final decision. 

 Many of the services and the assistance described above are comparable to the nonfiduciary participant education services defined by EBSA in Interpretive Bulletin 96-1 

(“IB 96-1”) and, therefore, we urge EBSA to consider developing guidance that is 

comparable to IB 96-1 to address many of the concerns identified in this letter. 

Additionally, we urge EBSA not to finalize the Proposal or make it effective before 

issuing such guidance. 

D. Seller’s Exception (Section II, D) – We urge EBSA to modify certain language in the 

Proposal as follows: 

 “the provision of advice or recommendations if ... such person can 

demonstrate that the recipient of the advice knows or, under the 

circumstances, reasonably should know, that the person is providing 

the advice or making the recommendation in its capacity as a 

purchaser or seller of a security or other property, or as an agent of, or 

appraiser for, such a purchaser or seller, has a financial interest in 

the decision that the recipient makes, and that the person is not 

undertaking to provide impartial investment advice.” (Recommended 

new language is in bold.) 

 We also urge EBSA to expand the seller’s exception so that a fiduciary may also rely 

on it with respect to advice and recommendations provided outside the scope of the 

fiduciary’s current engagement. We recommend that EBSA clarify that the seller’s 

exception is intended to cover the advice and recommendations of the seller until the 

recipient makes a decision with respect to an unresolved matter, even if an agreement 

has been signed or decisions have been made by the recipient with respect to other 

matters. Additionally, we request that EBSA clarify that the seller’s exception is 

intended to apply to a seller of products and services, including platform providers. 

E. Financial Information and Reporting Exception (Section II, E) – We urge EBSA 

to withdraw Sections (c)(1)(i)(A)(1) (which defines valuation services as investment 

advice) and (c)(2)(iii) (which provides exceptions). Additionally, as explained in the 

detailed discussion, we request that EBSA study these issues and their potential impact 

on the retirement plan community before issuing a final rule. 
SHAPING AMERICA’S RETIREMENT 4

 Alternatively, if EBSA does not accept our preferred approach, we urge EBSA to 

modify the exception at issue by deleting the following language from paragraph 

(c)(2)(iii), “unless such report involves assets for which there is not a generally 

recognized market and serves as a basis on which a plan may make distributions to 

plan participants and beneficiaries.” Additionally, we urge EBSA to modify the 

Proposal to provide that a service provider shall not be considered a fiduciary as a 

result of reporting, providing statements, using, relying on or taking any other 

necessary action for a plan based on, or in connection with, the value of any plan 

assets, including assets that do not have a generally accepted market value, unless such 

provider independently establishes or determines the value of such asset. We also 

urge EBSA to provide that a service provider will not become a fiduciary as a result of 

calculating the value for an investment option that does not itself have a recognized 

market value, where the value is otherwise determined based on the prices of the 

investment options’ underlying publicly traded securities. We also request that the 

final rule provide that group annuity contracts and other insurance company 

investment products that must be valued by the insurance provider should not cause 

the insurance product provider to become a plan fiduciary. 

F. Pending Securities and Exchange Commission Standards of Care (Section II, F) – 

We urge EBSA to take a measured and restrained approach in changing the definition 

of investment advice and fiduciary. This will provide additional time for the regulated 

community, EBSA and the SEC to evaluate any potential SEC and EBSA initiatives 

together. 

G. Compliance Deadline (Section II, G) – We urge EBSA to allow 18 months from the 

date that any final rule is published in the Federal Register for the regulated 

community to comply. 

H. Distribution Counseling (Section III) – The SPARK Institute urges EBSA to 

maintain its current position that distribution counseling services and 

recommendations that a person take a distribution are not investment advice under 

ERISA, even when combined with recommendations as to how to invest the 

distributed funds. Additionally, we urge EBSA to issue additional guidance that is 

comparable to IB 96-1 that clearly defines acceptable distribution counseling, 

assistance and education that can be provided by the plan sponsor and service 

providers to the plan, including plan fiduciaries. However, these issues are different 

from the in-plan or ongoing investment advice issues that are dealt with in the 

Proposal, and therefore, we urge EBSA to handle them separately in order to allow it 

and the regulated community adequate time to fully evaluate the alternatives and 

implications of any changes. 

I. Distribution Counseling - Other Applicable Laws (Section III, B) – The Securities 

and Exchange Commission (“SEC”) recently released a 208 page study that evaluates 

the effectiveness of existing legal or regulatory standards of care for brokers, dealers, 

investment advisers, and persons associated with them when providing personalized 

investment advice and recommendations about securities to retail investors. In light of 

the study and in order to avoid potentially conflicting rules and duplication of effort by 
SHAPING AMERICA’S RETIREMENT 5

everyone that could be impacted, we urge EBSA to continue to evaluate these issues, 

including considering future action by the SEC or Congress, but to otherwise postpone 

any action that would reverse its current position under AO 2005-23A. 

II. Definition of Fiduciary

A. General Concerns – The Proposal expands the definition of a fiduciary under ERISA 

by redefining when a service provider renders “investment advice” for a fee within the 

meaning of Section 3(21)(A)(ii) of ERISA. Under the Proposal, a service provider 

renders investment advice, and would be a plan fiduciary, when it “[m]akes 

recommendations as to the advisability of investing in, purchasing, holding, or selling 

securities or other property, or ... [p]rovides advice or makes recommendations as to 

the management of securities or other property”4

 and meets certain other requirements. 

Under the Proposal, the service provider would be considered a fiduciary if it provides 

advice or recommendations regarding the matters described above 

 “pursuant to an agreement, arrangement or understanding, written or 

otherwise, between such person and the plan, a plan fiduciary, or a 

plan participant or beneficiary that such advice may be considered in 

connection with making investment or management decisions with 

respect to plan assets, and will be individualized to the needs of the 

plan, a plan fiduciary, or a participant or beneficiary.”5

 As noted above, we support EBSA’s efforts to clarify the definition of fiduciary to 

include certain additional plan service providers and to help plan sponsors understand 

whether or not their service providers are acting in a fiduciary capacity. However, we 

are concerned that the scope of the Proposal is very broad and the availability and 

scope of the exceptions are unclear. As a result, the threshold for when a service 

provider will be considered a fiduciary would be substantially lower, and in many 

instances, significantly unclear. In other instances, the Proposal treats some services 

as investment advice that in our view should not be treated as such. It is crucial that 

service providers be able to structure their products, services, and compensation 

arrangements with reasonable certainty about whether they are a fiduciary with respect 

to a plan and its participants. Service providers must have greater certainty than the 

Proposal provides so that they can reasonably avoid unintentionally and unwillingly 

becoming fiduciaries, and engaging in prohibited transactions. Much of the 

uncertainty relates to product and service design issues and long standing practices 

resulting from customer needs and demands. Unintentional fiduciary status is a 

realistic possibility, if not a likelihood, under the Proposal in connection with 

investment platform products and services, and in many other situations. We provide 

many examples of situations involving potential unintended consequences and 

 

4

2510.3-21(c)(1)(i)(A)(2) & (3).

5

2510.3-21(c)(1)(ii)(D).
SHAPING AMERICA’S RETIREMENT 6

unintended fiduciary status throughout this letter. We emphasize that the stakes for 

service providers are significant because the adverse consequences we discuss herein 

could impact all of their customer relationships. 

 Plan service providers and their customers should have reasonable certainty, flexibility 

and discretion in determining and agreeing on a service provider’s role and whether a 

fiduciary relationship is expected. This will allow plan sponsors and participants to 

get the non-fiduciary products and services they need at a reasonable fee. Service 

providers should not be subject to significant risk that an agreement with a plan or plan 

participants to provide non-fiduciary products and services will be treated, after the 

fact, as a fiduciary services arrangement. As EBSA knows, class action attorneys have 

discovered retirement plans as potentially fertile grounds for large settlements from 

perceived deep pocket defendants, typically large plan sponsors and service providers. 

Although these class action lawyers have had limited success on the merits of their 

cases, an increased threat of litigation, and the costs associated with defending against 

them, will have a significant chilling and negative effect on the retirement plan 

community. The greater risk of this hindsight recharacterization of relationships will 

likely cause service providers to discontinue providing many services that plan 

sponsors and participants demand or to charge substantially higher fees in order to 

account for the higher risk and responsibility that comes with being a fiduciary. As 

EBSA knows, plan participants will ultimately pay any such higher fees. We believe 

that this does not advance EBSA’s and other policy makers’ goals of providing lower 

cost ways for American workers to save for retirement. 

 We urge EBSA to take a more measured and restrained approach in changing the 

definition of investment advice and fiduciary so that it and the entire retirement plan 

community can evaluate the implications for everyone affected. As discussed more 

fully below, the impact on existing provider and plan relationships, and the products 

and services that are widely used will be dramatic and potentially harmful to many. 

 If EBSA decides to proceed with expanding the definition of a fiduciary, we urge it to 

consider the following recommendations that can form the basis for modifications to 

the Proposal or a safe harbor under the final rule. 

1. Unless a service provider has or exercises discretion with respect to plan assets, the 

service provider and a plan, plan sponsor, plan participant or beneficiary should be 

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

whether a fiduciary relationship is intended or expected and, if so, the scope of that 

fiduciary relationship. Serving in a fiduciary capacity with respect to one aspect of 

plan investment management or services should not automatically result in 

fiduciary status with respect to other matters for which the service provider and the 

plan or plan sponsor have not specifically agreed that a fiduciary relationship 

exists.. 

2. Any written agreement regarding a service provider’s role as a fiduciary or nonfiduciary should include an express statement that the products and services are not 
SHAPING AMERICA’S RETIREMENT 7

investment advice or fiduciary service, except as specifically provided otherwise in 

the agreement. 

3. The service provider should disclose in any such agreement and consistent with the 

regulations under Section 408(b)(2) of ERISA, the financial interests it may have 

regarding any decisions that the plan, plan sponsor, plan participant or beneficiary 

may make in connection with the plan and plan assets. 

4. A service provider should be permitted to provide advice, recommendations, and 

information to a potential customer during the sales process if the selling party 

expressly discloses that the seller is providing such in a non-fiduciary capacity as a 

seller and that it has a financial interest regarding any decisions that the potential 

customer may make in connection with the plan and plan assets. Even if a service 

provider is a fiduciary with respect to one aspect of a plan’s investments, that 

status should not bar the fiduciary from relying on the selling exception to provide 

advice and recommendations with respect to matters outside the scope of the 

service provider’s fiduciary responsibilities (e.g., a plan’s fixed-income manager 

should not be barred from cross-selling its equity management capabilities on a 

non-fiduciary basis). 

The SPARK Institute believes that modification to the Proposal or safe harbor that is 

based on the above concepts will accomplish EBSA’s goals, continue to protect plans, 

plan sponsors, plan participants and beneficiaries and address service providers’ 

concerns. Alternatively, if EBSA does not accept our preferred approach as described 

above, our concerns and additional recommendations regarding specific aspects of the 

Proposal are summarized below. 

B. Unintentional Fiduciary Status of Certain Investment Adviser Affiliates – The 

Proposal provides that a person renders investment advice if such person makes 

recommendations as to the advisability of investing in, purchasing, holding or selling 

plan investments, and such person meets at least one other requirement.6

 As relevant 

to this discussion, such person would also have to either (1) directly or indirectly, 

including through or together with affiliates, be an investment adviser under the 

Investment Advisers Act (“Investment Adviser”),7

 or (2) provide advice or make 

recommendations regarding plan investments pursuant to an agreement, arrangement 

or understanding, written or otherwise, with the plan, a plan fiduciary, or a plan 

participant or beneficiary that such advice may be considered in connection with 

making investment or management decisions with respect to plan assets, and will be 

individualized to the needs of the plan, a plan fiduciary, or a participant or 

beneficiary.8

 

6

 2510.3-21(c)(1)(i)(A)(2), and 2510.3-21(c)(1)(ii).

7

 2510.3-21(c)(1)(ii)(C).

8

 2510.3-21(c)(1)(ii)(D).
SHAPING AMERICA’S RETIREMENT 8

We are concerned that the language in foregoing sections of the Proposal either is 

intended to or can be misinterpreted to mean that a non-fiduciary service provider that 

makes recommendations to a plan about plan investments, but does not meet the 

substantive requirements under the second clause in the preceding paragraph, could 

still be deemed to have provided investment advice if it is affiliated with an 

Investment Adviser. The Proposal appears to cause the deemed fiduciary outcome 

even though the affiliated Investment Adviser is not involved in providing the 

recommendation made by the provider with the direct relationship to the plan, or other 

plan representatives. 

Our members are concerned that the regulation, as written, creates a double standard 

and extremely low threshold that will cause service providers who are merely 

affiliated with an Investment Adviser to become unintentional plan fiduciaries. As 

discussed in the sections that follow in this letter, the double standard will force such 

providers to stop providing many services to their plan customers and prospects in 

order to avoid becoming an unwilling fiduciary and engaging in unintentional 

prohibited transactions. This will put such providers at a competitive disadvantage 

relative to other service providers and disrupt the existing balance in the retirement 

plan industry. 

In order to resolve this issue, we urge EBSA to modify the language in the Proposal to 

clarify that merely being affiliated with an Investment Adviser will not cause a service 

provider to be treated as having rendered investment advice, and that such service 

provider will only be treated as having rendered investment advice if it meets one of 

the other requirements under Section (c)(1)(ii). 

C. Investment Platform Exception – EBSA recognized that absent an exception to the 

new fiduciary definition, retirement plan investment platform providers and plans 

could be adversely impacted. Accordingly, the Proposal includes an exception for 

investment platform providers that states that a service provider will not be treated as 

rendering investment advice as a result of 

“[m]arketing or making available (e.g., through a platform or similar 

mechanism), without regard to the individualized needs of the plan, its 

participants, or beneficiaries, securities or other property from which a 

plan fiduciary may designate investment alternatives into which plan 

participants or beneficiaries may direct the investment of assets held 

in, or contributed to, their individual accounts, if the person making 

available such investments discloses in writing to the plan fiduciary 

that the person is not undertaking to provide impartial investment 

advice.”9

 

9

2510.3-21(c)(2)(ii)(B).
SHAPING AMERICA’S RETIREMENT 9

Although we commend EBSA for including the investment platform exception, as 

noted above, we are concerned that the Proposal establishes a broad and very low 

threshold for when a service provider becomes a fiduciary and that the exception does 

not provide clear and sufficient protection that is needed by investment platform 

providers to be able to continue to offer broad investment choices and critical services 

to plans and plan fiduciaries. We believe these product structures and services should 

not be considered investment advice under the final rule. 

As EBSA knows, many plan service providers allow plan sponsors to choose their 

plans’ investment options from a list of funds that could include fifty or thousands of 

choices. At various times in the relationship between a plan and a service provider, 

plan representatives, including employees or other professionals hired by a plan, may 

ask the service provider to provide information, tools, education or other guidance to 

help narrow down the choices of funds available to the plan. Service providers are 

able to respond to these requests in various ways in today’s regulatory environment 

and provide plan sponsors valuable assistance in a non-fiduciary capacity. Plan 

sponsors are informed that the service provider is providing non-fiduciary guidance 

and tools, and that the plan sponsor is ultimately responsible as a fiduciary for 

selecting and monitoring the investment options on behalf of the plan. This allows the 

plan sponsor to get the help it needs in narrowing down the investment choices 

available to it without incurring potentially substantial additional costs for a third party 

to serve as a fiduciary. We are concerned that the new definition establishes a broad 

and very low threshold that will force service providers to stop providing these 

services in order to avoid unintentionally and unwillingly becoming fiduciaries, and 

engaging in prohibited transactions. 

The following is a summary of some of the situations where plan sponsors ask for help 

and the approaches and tools that service providers offer in response. 

1. Prospects, RFPs and the Sales Process – At the outset, we note that although the 

Proposal includes an exception for certain sales activities, we are concerned about 

potential limitations and uncertainty in its scope that could significantly limit its 

usefulness. When looking for a new service provider for a plan, plan sponsors will 

ask detailed questions about the investment options offered by prospective 

providers. They also ask about the tools and assistance that are available to help 

them select their plans’ investment options. Additionally, plan sponsors typically 

ask service providers to provide a sample fund lineup for the plan or to identify 

specific funds from its investment platform that are comparable to those that the 

plan currently uses. The plan sponsor may provide parameters for the service 

provider to consider in making those recommendations, such as using the existing 

funds as a guide or may provide other criteria such as information from a plan’s 

investment policy statement. 

Prospective providers that do not respond to these requests are generally 

eliminated from consideration by the plan sponsor. When responding to such 

requests, service providers disclose that they are doing so in a non-fiduciary 

capacity. We note that these types of requests may also be made by plan sponsors 
SHAPING AMERICA’S RETIREMENT 10

when they are conducting their periodic plan reviews and when they are 

considering replacing a fund. In all cases, service providers inform the plan 

sponsor that the information and assistance it provides is not intended to be 

investment advice and that the plan sponsor must make its own decisions based on 

its particular facts and circumstances. Investment advice and fiduciary service in 

these situations would involve higher fees and require greater time and effort by 

the service provider because of the increased responsibility and risk. However, 

many plan sponsors are unwilling or unable to pay to have such recommendations 

and information provided to them by someone serving as a fiduciary. 

We also note that plan sponsors often must make choices about what class of 

shares to use in their plans. Different share classes have different expense ratio 

and revenue sharing arrangements which give plan sponsors greater choices in 

determining how to pay for plan services. As with most other decisions of this 

type, plan sponsors typically ask the service provider for assistance. Indeed, many 

service providers are indirectly compensated from investment options and plan 

sponsors may seek information and guidance from such service providers as to 

how the selection of certain investment options will affect the fees paid by the plan 

and the potential charges that the plan sponsor may have to pay out-of-pocket. For 

example, a record keeper might inform a plan sponsor that the plan sponsor may 

select investment options for its plan from a particular fund family, but that if it 

does so, a record keeping fee will apply. We are concerned that such responses 

and statements could be misinterpreted or construed, particularly in hindsight, as 

constituting advice or a recommendation as to the advisability of including a 

particular fund in the plan. It is likely that service providers will be unwilling to 

provide any information or assistance to plan sponsors on these issues under the 

proposed rule. 

We are concerned that, absent a clarification of, or modification to, the final rule, 

service providers will likely either stop providing the assistance and information 

that plan sponsors need and often demand, or only do so when they are specifically 

hired to provide investment advice and paid to provide fiduciary services in a 

manner that does not give rise to a non-exempt prohibited transaction. Service 

providers will be forced to take very conservative and restrictive approaches in 

order to avoid being unintentionally and unwillingly treated as fiduciaries, and 

engaging in prohibited transactions, based on a hindsight analysis. 

2. Plan Conversions and Fund Replacements – Additional concerns arise in 

connection with discussions about the process of moving the investments from an 

outgoing provider to a new provider (a “conversion”), and when a plan adds or 

replaces a fund. There are several ways to accomplish a conversion which 

inevitably involves discussions about the investment options. The approaches 

include: 

a. Liquidating the old investments, holding them in cash for a period of time and 

then reinvesting them in the new funds with the new vendor. This option 
SHAPING AMERICA’S RETIREMENT 11

carries with it market risk for all plan participants and for all of the plan assets 

while they are held as cash. 

b. Liquidating all of the plan assets and transferring or “mapping” them into a 

single fund or series of funds (e.g., target date funds) pending reinvestment in 

the investment options that will be used under the new provider’s platform. 

The interim funds may not be comparable to the old funds and are intended for 

short term use in order to facilitate a smooth transition and to mitigate some 

market risk. This option is easier and faster to accomplish than the third 

option, discussed below, but in many instances requires the plan sponsor to 

pick the transition fund(s). Some providers allow plan sponsors to choose this 

option but require that a specific fund or funds be used. Others may require, 

for administrative convenience, that the plan use this approach and also require 

that the plan use a specific fund or funds that are identified by the provider in 

advance. 

c. Reregistering the investment options that will be retained from the outgoing 

provider to the new provider, and liquidating and transferring assets from the 

old options that are being replaced. This approach is more complicated than 

the previous two because it requires coordination between many parties (i.e., 

the fund companies), whereas liquidating assets and transferring cash, is 

generally less complicated and more time efficient. 

d. A combination of any number of the first three approaches. 

Plan sponsors need help understanding this process and the options available to 

them. Service providers are familiar with conversions and their complexities 

because these transactions are an integral part of their business. Plan sponsors, in 

contrast, might not go through a conversion for many years and are generally not 

familiar with the process. The conversations that must take place to ensure a 

smooth transition have investment option issues embedded in them. These issues 

may be raised in the RFP and sales process but they continue in conversations after 

the plan selects a new vendor. Service providers are concerned that under the 

Proposal (a) they will not be able to provide the assistance and information that 

plan sponsors need and demand, without becoming plan fiduciaries, and (b) if they 

become a fiduciary, such assistance and information may constitute a non-exempt 

prohibited transaction if the service provider is compensated indirectly from 

investment options in the plan. The sales exception does not appear to provide 

adequate protection because many of these issues are discussed and resolved only 

after the plan and service provider have established a formal relationship. 

Additionally, we note that these same issues and concerns arise when a plan 

replaces an investment option. The sales exception would clearly not provide 

protection from fiduciary status in that situation either. 

 

3. Product Features and Requirements – Our members have informed us that some of 

their products include specific fund requirements that a plan must abide by in order 
SHAPING AMERICA’S RETIREMENT 12

to use a particular product or get certain pricing. Examples of such requirements 

include using a minimum number of the provider’s proprietary funds as investment 

options, mandating the use of a qualified default investment alternative (“QDIA”), 

using a certain fund or family of funds as the plan’s QDIA, or setting a maximum 

number of funds that can be used as investment options in a plan. We are 

concerned that service providers will not be able to structure their products and 

services as needed under the Proposal. Additionally, many providers may have to 

restructure their existing products and services and renegotiate contracts with 

existing customers to avoid becoming unwilling fiduciaries, and engaging in 

prohibited transactions. 

 

 Some providers may offer “warranty” programs that certify to a plan sponsor that 

the funds that the plan sponsor has chosen meet their fiduciary requirements. In 

order to be eligible for the warranty, the plan sponsor must include at least one 

fund in each asset class identified by the warranty provider and may also be 

required to offer a series of asset allocation portfolios (e.g., target date funds). The 

platform and warranty provider does not pick the funds for the plan and discloses 

that it does not intend for its products and services to cause it to become a 

fiduciary. We are concerned that because of the broad scope of the Proposal and 

uncertainty regarding the platform exception, such programs would have to be 

eliminated by service providers who are concerned about unintentionally and 

unwillingly becoming plan fiduciaries, and engaging in prohibited transactions. 

 

4. QDIAs – Many service providers educate plan sponsors about the use of QDIAs, 

and as noted above, some require plan sponsors to include one in their plan. This 

issue inevitably leads to conversations about which funds can be used. We are 

concerned that because of the broad scope of the Proposal and uncertainty 

regarding the exceptions, service providers will not be able to provide the 

assistance and information that plan sponsors need. 

5. Investment Option Selection and Monitoring Tools – Many service providers offer 

tools that are designed to assist plan sponsors in selecting and monitoring their 

plan investment options. These tools may be provided directly to plan sponsors or 

may be used by others (e.g., brokers and advisors) who work with the plan 

sponsor. These tools are intended to educate the plan sponsor regarding a selection 

and monitoring process including the criteria that could be used to evaluate funds 

(e.g., asset class, historical performance, and fees). A tool may also provide a list 

of investment options that meet the criteria that the plan sponsor or its 

representative decides to use. There are a significant number of tools and 

approaches that are available. Unless the service provider intends to, and agrees 

to, become a fiduciary by providing investment advice for a plan, the tools and 

related materials disclose that they are for educational purposes only and that the 

service provider is not providing investment advice and is not a fiduciary. We are 

concerned that because of the broad definition of fiduciary under the Proposal, 

such tools could not be offered by service providers without substantially 

increasing the risk that they can become involuntary and unintentional fiduciaries. 

Consequently, absent clarification of, or a modification to, the final rule, service 
SHAPING AMERICA’S RETIREMENT 13

providers may discontinue offering investment selection and monitoring tools to 

plan sponsors. 

In order to address our concerns, we urge EBSA to clarify or modify the Proposal 

in the following ways. Service providers should be permitted to make 

recommendations and provide information to a plan, plan sponsor, participant and 

beneficiary about plan investment options in a non-fiduciary capacity provided that 

any such assistance is based on “objective criteria” including criteria 

recommended by the service provider, and provided further that the service 

provider discloses that the assistance is not intended to be advice, that the service 

provider is not acting in a fiduciary capacity, that the service provider may have a 

financial interest regarding the decisions that are made (if applicable), and that the 

recipient is ultimately responsible for making the final decision. “Objective 

criteria” should be broadly defined and include criteria identified by the service 

provider, information from a plan’s investment policy or other information 

provided to the service provider by the plan sponsor, and the identity and 

characteristics of a plan’s current investment options. Examples of this type of 

criteria would be asset classes, historical performance, manager tenure, expense 

ratios, peer ranking and comparisons, and quality ratings, among others. 

We note that many of the services and assistance described above are comparable 

to the non-fiduciary participant education services defined by EBSA in IB 96-1. 

Although the concepts in IB 96-1 are helpful by analogy, IB 96-1 does not provide 

the direct protection and assurances that service providers need. We believe that 

comparable protection for a service provider is appropriate because the provider is 

generally helping a plan fiduciary who is more financially sophisticated than the 

typical participant. Moreover, the plan fiduciary receiving the help has specific 

legal obligations to the plan under ERISA. We urge EBSA to consider developing 

guidance that is comparable to IB 96-1 to address many of the concerns identified 

in this letter. Additionally, we urge EBSA not to finalize the Proposal or make it 

effective before issuing such guidance. 

Our suggested changes will avoid forcing plans, plan sponsors, participants and 

beneficiaries from having to hire a fiduciary for the assistance they need and 

paying higher fees for it. It will also allow service providers to provide assistance 

to their customers and prospects without substantial risk that they will unwillingly 

and inadvertently become plan fiduciaries, and engage in prohibited transactions. 

The interests of plan sponsors, plans, plan participants and beneficiaries will be 

protected through the required disclosures described above. 

D. Seller’s Exception – EBSA recognized that service providers must be able to sell their 

products and services, and provided an exception for certain sales activities. Under the 

Proposal, generally, a service provider will not become a fiduciary with respect to 

“the provision of advice or recommendations if ... such person can 

demonstrate that the recipient of the advice knows or, under the 

circumstances, reasonably should know, that the person is providing 
SHAPING AMERICA’S RETIREMENT 14

the advice or making the recommendation in its capacity as a 

purchaser or seller of a security or other property, or as an agent of, or 

appraiser for, such a purchaser or seller, whose interests are adverse to 

the interests of the plan or its participants or beneficiaries, and that the 

person is not undertaking to provide impartial investment advice.”10

(Emphasis added.) 

We support EBSA’s apparent objective of helping plan sponsors and participants 

better understand when a service provider is acting in a selling capacity. Although we 

commend EBSA for including the sales exception in the Proposal, we are concerned 

that it casts all sales activities in a negative light as being “adverse” to the interests of 

plan sponsors and participants. We are also concerned about the potential limitation 

on the scope and usefulness of the exception. 

1. Seller’s Activities as Adverse – The language in the Proposal characterizes every 

seller and prospective customer relationship as adverse. We presume that the term 

“adverse” was used in a technical and legal sense. Although sellers have a financial 

interest in the decisions made by prospects, the vast majority of sellers and 

prospects would not characterize the circumstances as adverse, in the plain English 

meaning of the word to the average person. Buyers generally understand and 

accept that a seller has a financial interest in making a successful sale. However, 

we are concerned that the Proposal could be interpreted as requiring the term 

“adverse” to be used in disclosures, which may cause needless concern for plan 

sponsors and participants and result in them mistrusting their service providers. 

In order to address our concerns, we urge EBSA to modify the quoted language 

from the Proposal as follows: 

“the provision of advice or recommendations if ... such person can 

demonstrate that the recipient of the advice knows or, under the 

circumstances, reasonably should know, that the person is providing 

the advice or making the recommendation in its capacity as a 

purchaser or seller of a security or other property, or as an agent of, or 

appraiser for, such a purchaser or seller, has a financial interest in 

the decision that the recipient makes, and that the person is not 

undertaking to provide impartial investment advice.” (Recommended 

new language is in bold.) 

The SPARK Institute believes that the modified disclosure, combined with the 

disclosures that a prospect turned customer will receive from a service provider as 

 

10

 2510.3-21(c)(2)(i).
SHAPING AMERICA’S RETIREMENT 15

required under 408(b)(2) of ERISA, will provide substantial information and protection 

for plans, plan sponsors and participants. 

 

2. Persons Who Have Acknowledged Fiduciary Status – Under the Proposal, a person 

that has acknowledged its status as an investment fiduciary is unable to rely on the 

seller’s exception. The SPARK Institute urges EBSA to expand the seller’s 

exception so that a fiduciary may also rely on it with respect to advice and 

recommendations provided outside the scope of the fiduciary’s current engagement. 

For example, if a plan hires a company to manage its fixed-income assets, the 

company should not be barred from relying on the seller’s exception to promote its 

investment expertise in other fields (e.g., domestic equities, international, etc.), 

provided that the investment fiduciary clearly discloses that it is acting outside its 

existing fiduciary capacity. Without the requested relief, the investment provider 

may be unable to promote its investment management capabilities out of fear of 

becoming a plan fiduciary for advice and recommendations provided at the 

marketing stage before the plan sponsor has affirmatively agreed to expand the 

provider’s fiduciary engagement. Thus, the Proposal may interfere with a plan or 

plan sponsor’s ability to hire an investment manager on a limited basis in order to 

evaluate the manager’s performance before deciding to expand the manager’s role if 

it meets performance expectations. 

3. Scope of Seller’s Exception 

a. Selling Period - As noted above, we commend EBSA for recognizing the need 

for an exception under the Proposal for the advice or recommendations that a 

service provider may provide during the selling process. However, many of the 

conversations and issues related to a plan’s investments may begin during the 

sales process without a plan sponsor making any final decisions (e.g., selecting 

the exact investment options, or whether and what fund to use as a QDIA). As 

discussed above in connection with the platform exception, a service provider 

may provide various forms of assistance in the sales process (e.g., providing a 

list of comparable funds as investment options) that, absent an exception, could 

be treated as investment advice under the Proposal. This may happen in 

response to an RFP or in conversations and interviews as a plan sponsor 

narrows down its choices among providers. Plan sponsors generally make final 

decisions about their investment options after signing the service agreement 

with the provider. This allows them more time to consider their investment 

choices and to focus on the specifics of those decisions separately from 

administration, record keeping and general services decisions. It would also be 

unreasonable and overly burdensome for a service provider to provide all of its 

service and assistance related to the fund selection process with every plan 

sponsor before the plan sponsor has committed to hiring it. 

We are also concerned that the activities covered under the sales exception will 

be based on the parties, particularly the seller, being able to identify and 

demonstrate when the sales process ends. However, as the examples above 

show, it is not always clear when the sales process ends. Although certain 
SHAPING AMERICA’S RETIREMENT 16

decisions in connection with a sale may be resolved after an agreement is 

signed, a plan sponsor will expect the assistance and conversations on many 

other issues to proceed. The exception in the Proposal does not appear to 

extend its coverage in this situation. As a result, plan sponsors and service 

providers will be in an awkward and difficult position with respect to each 

other. The plan sponsor will expect follow-through and resolution of the 

investment related issues, but the service provider will be forced to stop 

providing help unless it has agreed to serve as a plan fiduciary. 

In order to resolve our concerns, we urge EBSA to clarify that the seller’s 

exception is intended to cover the advice and recommendations of the seller 

until the recipient makes a decision with respect to an unresolved matter, even if 

an agreement has been signed or decisions have been made by the recipient with 

respect to other matters. We also urge EBSA to consider the recommendations 

and suggested modifications made throughout this letter in order to provide 

more flexibility and certainty for plan sponsors and service providers. By 

adopting the foregoing recommendation in combination with several others in 

this letter, e.g., those relating to the platform exception, service providers will 

be better able to provide information that plan sponsor prospects need and be 

responsive to their questions during the sales process. 

b. Investment Platform Providers - We are concerned that the seller’s exception 

may not have been intended to apply, or the language used in the Proposal may 

be misinterpreted as not applying to investment platform providers. As written, 

the seller’s exception refers to persons providing advice or making 

recommendation in a “capacity as a ... seller of a security or other property.” 

Our members who are investment platform providers may find it necessary or 

beneficial to rely on the seller’s exception in certain situations so that they can 

continue, in a non-fiduciary capacity, to provide information, tools, education 

and other guidance to plan sponsors in narrowing down the choices of funds 

available to the plan. However, it is unclear who will be considered a seller of 

securities under the Proposal and whether the determination is intended to be 

based on federal securities laws, or other laws that may apply. 

 

In order to address our concerns, we request that EBSA clarify that the seller’s 

exception is intended to apply to a seller of products and services, including 

platform providers. 

 

c. Agents and Third Parties - The Proposal appears to expressly provide that the 

seller’s exception can be used by anyone selling plan products and services, 

including an agent or unaffiliated third party selling a product on behalf of 

another provider. However, as noted above, EBSA officials have indicated 

informally that the exception would only be available to service providers and 

their affiliated intermediaries selling their own products and services. We are 

concerned that this limitation on the seller’s exception can cause the entire 

Proposal to have unintended consequences which could potentially be disruptive 

to existing service arrangements, and needlessly limit the availability and 
SHAPING AMERICA’S RETIREMENT 17

distribution of certain products through non-fiduciary intermediaries. We raised 

this question on the recent Regulatory Agenda Chat with EBSA.11 We are 

pleased that EBSA responded that the seller’s exception “is not limited to agents 

selling their own products.”12 However, as recommended by EBSA, together 

with its response, we have summarized our concerns below. 

In evaluating the Proposal, including how service providers will be able to 

continue to provide existing non-fiduciary services without involuntarily and 

unintentionally becoming fiduciaries, it has become evident that many may have 

to rely on the seller’s exception in situations where the platform exception may 

not apply. Absent further clarification from EBSA about a number of issues 

addressed in the letter, this is likely to be necessary in connection with many of 

the plan investment option selection and monitoring activities discussed above. 

However, many platform providers include investment options from unaffiliated 

companies as part of the choices for plan sponsors. Consequently, we are 

concerned that open architecture platform providers will not be able to rely on 

the seller’s exception with respect to investment options of unaffiliated fund 

providers in the fund selection and monitoring processes. 

This may be particularly disruptive to small plans that are more likely than 

larger plans to buy from, and work with, intermediaries. Limiting the seller’s 

exception could force intermediaries to charge higher fees as a result of having 

to serve in a fiduciary capacity and the greater risk and responsibility of doing 

so, or stop selling the affected products and service. In either case, this will be 

detrimental to plan sponsors who will either have to pay greater fees or have 

fewer choices in service providers, products and services. Such a limitation will 

also disrupt existing product and service sales and distribution channels. 

We request that EBSA reiterate that the seller’s exception will be available to 

agents and independent third parties who sell and distribute products and 

services of other companies. 

E. Financial Information and Reporting Exception – Under the Proposal, a service 

provider renders investment advice, and would be a plan fiduciary, when it “[p]rovides 

advice or an appraisal or fairness opinion, concerning the value of securities or other 

property.”13 EBSA recognized that, absent an exception, the noted change would limit 

service providers’ ability to provide important financial information to plan sponsors 

and participants and limit service providers’ ability to help plan sponsors meet certain 

reporting requirements, including providing participant statements. Accordingly, 

 

11

 Regulatory Agenda Chat with EBSA, Question submitted by Larry Goldbrum (January 4, 2011).

12

 Id.

13

 2510.3-21(c)(1)(i)(A)(1).
SHAPING AMERICA’S RETIREMENT 18

EBSA included an exception in the Proposal that states that “advice, or appraisal or 

fairness opinion” does not include the 

“preparation of a general report or statement that merely reflects the 

value of an investment of a plan or a participant or beneficiary, 

provided for purposes of compliance with the reporting and disclosure 

requirements of the Act, the Internal Revenue Code, and the 

regulations, forms and schedules issued thereunder, unless such report 

involves assets for which there is not a generally recognized market 

and serves as a basis on which a plan may make distributions to plan 

participants and beneficiaries.”14 (Emphasis added.) 

We commend EBSA for recognizing the need for an exception under the Proposal. 

However, we are concerned about the scope of the changes that will treat certain 

valuation services as fiduciary services. We are also concerned that the proposed 

exception does not provide clear and sufficient protection that is needed by service 

providers to be able to continue to provide important information and services that 

plans need. As discussed more fully below, the limitation under the exception for 

reports on assets that do not have a generally recognized market value is likely to 

create significant problems for plan sponsors and service providers. The SPARK 

Institute believes that many of the activities that would be treated as fiduciary services 

under the proposed definition should not be considered investment advice and should 

not cause a service provider to become a plan fiduciary. 

 

For example, record keepers provide benefit statements, maintain call centers and 

provide web sites for participants to access information about their plan accounts. The 

account balance information that is provided is also used for purposes of making 

distributions. However, the asset values are generally not determined or established 

by the service provider that provides the information through the channels noted 

above. Some investment options, such as bank collective funds, separately managed 

accounts and other non-registered options may not have a generally recognized market 

value because they are not publicly traded but their underlying investments generally 

are. In some instances, a record keeper may, as an accommodation to the plan, 

provide record keeping and administrative services, including those noted above, for 

an asset that does not have a generally recognized market value. In such instances, the 

asset may be valued by the investment provider or another party and supplied to the 

record keeper to display and use as needed. If a plan holds a group annuity contract or 

other insurance company investment products, the product provider would have to 

provide a value to the plan sponsor and record keeper for informational and 

distribution purposes including for calculating a required minimum distribution. 

Additionally, an investment option may be valued based on the prices of publicly 

traded securities owned by or held in the investment option (e.g., a “fund of funds” 

 

14

 2510.3-21(c)(2)(iii).
SHAPING AMERICA’S RETIREMENT 19

that holds multiple publicly traded mutual funds, or an employer stock fund that holds 

a cash component (e.g., money market fund) and employer stock). The fund may be 

maintained for the plan by a record keeper on a “unitized” basis. The record keeper or 

some other service provider may calculate the value of the units on a daily basis. 

While these unitized funds do not have their own generally recognized market value, 

their value is based solely on the value of publicly traded securities. 

These are just a few examples that demonstrate our concerns about the scope of the 

Proposal and limitations on the exception. As we have noted throughout this letter, we 

are very concerned that the implications of the proposed rule change are likely to be 

dramatic and have many unintended consequences. 

Given our concerns and the importance of the affected service to retirement plans, we 

request that EBSA address these matters in a separate initiative. We request that 

EBSA study these issues and their potential impact on the retirement plan community 

before issuing a final rule. Accordingly we urge EBSA to withdraw Sections 

(c)(1)(i)(A)(1) (which defines valuation services as investment advice) and (c)(2)(iii) 

(which provides exceptions). 

Alternatively, if EBSA does not accept our preferred approach, we urge EBSA to 

modify the exception at issue by deleting the following language from paragraph 

(c)(2)(iii), “unless such report involves assets for which there is not a generally 

recognized market and serves as a basis on which a plan may make distributions to 

plan participants and beneficiaries.” Additionally, we urge EBSA to modify the 

Proposal to provide that a service provider shall not be considered a fiduciary as a 

result of reporting, providing statements, using, relying on or taking any other 

necessary action for a plan based on, or in connection with, the value of any plan 

assets, including assets that do not have a generally accepted market value, unless such 

provider independently establishes or determines the value of such asset. We also 

urge EBSA to provide that a service provider will not become a fiduciary as a result of 

calculating the value for an investment option that does not itself have a recognized 

market value, where the value is otherwise determined based on the prices of the 

investment options’ underlying publicly traded securities. We request that the final 

rule provide that group annuity contracts and other insurance company investment 

products that must be valued by the insurance provider should not cause the insurance 

product provider to become a plan fiduciary. 

F. Pending Securities and Exchange Commission Standards of Care – As discussed 

more fully under Section III, B, on January 22, 2011 the SEC released a study 

evaluating the regulatory standards of care for brokers, dealers, investment advisers, 

and persons associated with them (the “SEC Study”).15 The 208 page study must be 

evaluated by the regulated community and any resulting legislative or regulatory 

 

15

 SEC Study on Investment Advisers and Broker-Dealers, As Required by Section 913 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (January 2011).
SHAPING AMERICA’S RETIREMENT 20

action will have a direct impact on brokers and advisers that provide services to 

retirement plans and participants. We note that the views expressed in the SEC Study 

were formally criticized by SEC Commissioners Kathleen L. Casey and Troy A. 

Paredes in a statement released with the study. Accordingly, as noted earlier, we urge 

EBSA to take a measured and restrained approach in changing the definition of 

investment advice and fiduciary. This will provide additional time for the regulated 

community, EBSA and the SEC to evaluate any potential SEC and EBSA initiatives 

together. We believe that this will ultimately result in a more harmonized set of rules 

and regulations governing these matters, and a more effective and cost efficient 

transition for everyone affected, including plan sponsors, plans, plan participants and 

service providers.

G. Compliance Deadline – As noted throughout this letter, the issues raised by the 

proposed changes to the definition of fiduciary and what activities constitute 

investment advice, are very complex, raise substantial concerns about unintended 

consequences, will dramatically impact the products and services available to plans, 

plan sponsors and participants, and could have devastating consequences for any 

service provider who unintentionally and unwillingly becomes a fiduciary and 

unintentionally engages in a prohibited transaction. The entire regulated community 

will need substantial time to evaluate any final rules and to determine how to comply 

with such rules. Additionally, service providers will likely need substantial time to 

work with their customers to educate them about the new rules and the impact on their 

product and services arrangements. This process can be particularly time consuming 

and burdensome for service providers to the extent that new contracts or amendments 

must be signed by their customers. Service providers are not able to control when 

their customers respond to requests to sign new agreements and amendments. Those 

that involve technical legal issues and changes in roles and responsibilities tend to be 

even more time consuming.

Accordingly, we urge EBSA to allow 18 months from the date that any final rule is 

published in the Federal Register for the regulated community to comply. 

III. Distribution Counseling – In the preamble of the Proposal, EBSA requested comments 

regarding whether the final regulations should define the provisions of investment advice to 

encompass recommendations related to taking plan distributions. The SPARK Institute 

supports EBSA’s efforts to safeguard the interests of participants and beneficiaries in 

connection with plan distributions. Participants frequently need assistance and to be 

educated about the distribution options available to them (e.g., leave the money in the plan, 

take a lump sum distribution, take advantage of certain lifetime income options, or rollover 

to another plan or IRA). Many of these choices involve considerations of a much wider 

range of issues than simply investment management (e.g., age, health, tax situation, and 

account consolidation). Similarly, in many cases, the participant has already determined to 

take a distribution from a plan (e.g., because he or she no longer has any connection to the 

sponsoring employer), and only wishes to obtain advice on the investment of the proceeds 

following distribution. 
SHAPING AMERICA’S RETIREMENT 21

Accordingly, The SPARK Institute urges EBSA to maintain its current position that 

distribution counseling services and recommendations that a person take a distribution are 

not investment advice under ERISA, even when combined with recommendations as to 

how to invest the distributed funds.16 Additionally, we urge EBSA to issue additional 

guidance that is comparable to IB 96-1 that clearly defines acceptable distribution 

counseling, assistance and education that can be provided by the plan sponsor and service 

providers to the plan, including plan fiduciaries. However, these issues are different from 

the in-plan or ongoing investment advice issues that are dealt with in the Proposal, and 

therefore, we urge EBSA to handle them separately in order to allow it and the regulated 

community adequate time to fully evaluate the alternatives and implications of any 

changes. The following discussion includes our responses to certain questions raised by 

EBSA, more detailed information about our concerns, and additional recommendations. 

 

A. Distribution Counseling and Education – As noted above, plan participants generally 

need and demand assistance when deciding whether or not to take a distribution from a 

retirement plan, what type of distribution to take and what to do with the proceeds. 

These decisions are impacted by many factors, including the alternatives available 

under the plan, the circumstances giving rise to a possible distribution (e.g., changing 

jobs, termination, retirement, among others), and personal circumstances (e.g., age and 

other available assets). EBSA’s position under AO 2005-23A allows a completely 

unrelated adviser, who is likely to have a financial interest in recommending that the 

participant take a distribution, to discuss these matters and even make specific 

recommendations. However, the rules make it harder for plan sponsor representatives 

and service providers, including those who are not fiduciaries, to provide comparable 

assistance. Plan sponsor representatives and service providers generally take a 

restrictive approach and provide limited assistance on these matters because the 

guidance in the AO specifically assumes that “the planner or adviser is neither chosen 

nor promoted by plan fiduciaries and is not otherwise a fiduciary with respect to the 

plan.”17

We recognize and appreciate EBSA’s view that a plan fiduciary should not be able to 

act in its own interest and should not be able to influence its own compensation, but the 

current regulatory scheme actually makes it harder for plan representatives who are 

likely to have a longer and more trusted relationship with plan participants to provide 

the needed help. The current regulatory environment gives unknown advisers who may 

be making “cold calls” to plan participants the ability to exercise greater influence over 

their decisions. If plan participants are unable to get the assistance that they need from 

plan sponsor representatives and the plan service providers, it is more likely that they 

can be influenced by unknown advisers when they seek help. Additionally, we are 

concerned that a sudden reversal of EBSA’s position, absent additional guidance, will 

 

16 See DOL AO 2005-23A, Question 3 (Dec. 7, 2005).

17

 Id. 
SHAPING AMERICA’S RETIREMENT 22

likely be more harmful to greater numbers of participants who will either not be able to 

get the assistance they need from plan sponsor representatives and plan service 

providers, or cause such services to be provided at costs that reflect the increased 

responsibility and risk of being a fiduciary. 

In order to address these issues, as noted above, we request that EBSA study these 

issues further and consider issuing additional guidance that is comparable to IB 96-1. 

Any guidance should clearly define acceptable distribution counseling, assistance and 

education that can be provided by the plan sponsor and service providers to the plan. 

We urge EBSA to consider allowing anyone who is otherwise a plan fiduciary to 

provide assistance and make recommendations to participants, provided that the 

fiduciary meets established guidelines, including disclosing to the participant any 

financial interest they may have in the decisions that are made. The SPARK Institute 

believes that a service provider should not be precluded from providing assistance and 

making recommendations to participants, or be subject to the fiduciary duty and 

prohibited transaction rules under ERISA in connection therewith, as a result of having 

been hired by the plan to provide other unrelated fiduciary services. For example, a 

bundled service provider that provides record keeping services, an investment platform 

and serves as the directed trustee of the plan (i.e., has no investment discretion and does 

not otherwise provide investment advice to the plan) should be able to provide 

distribution assistance and recommendation to participants. The SPARK Institute and 

its member companies welcome the opportunity to provide EBSA with additional 

information about current industry practices, participant needs and potential solutions 

on these issues. 

 

B. Other Applicable Laws – As noted above, on January 22, 2011, the SEC released a 

208 page study that evaluates the effectiveness of existing legal or regulatory standards 

of care for brokers, dealers, investment advisers, and persons associated with them 

when providing personalized investment advice and recommendations about securities 

to retail investors. The SEC Study also addresses whether there are gaps, 

shortcomings, or overlaps in legal or regulatory standards in the protection of retail 

customers relating to the standards of care for these intermediaries.”18 

As noted above, the SEC Study must be evaluated by the regulated community. Any 

resulting legislative or regulatory action will have a direct impact on the standards of 

care and fiduciary obligations of brokers, dealers, and investment advisers that deal 

with investors, including retirement plans and participants. Any new rules and 

regulations that may be proposed by the SEC will impact advisers who may currently 

be able to give advice to participants about distributions without being subject to the 

fiduciary rules under ERISA. While this may be a positive development, it is 

impossible to know at this early stage of their process. However, in order to avoid 

 

18

 SEC Study on Investment Advisers and Broker-Dealers, As Required by Section 913 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (January 2011). 
SHAPING AMERICA’S RETIREMENT 23

potentially conflicting rules and duplication of effort by everyone that could be 

impacted, we urge EBSA to continue to evaluate these issues, including considering 

future action by the SEC or Congress, but to otherwise postpone any action that would 

reverse its current position under AO 2005-23A. 

* * * * * 

The SPARK Institute appreciates the opportunity to provide these comments to EBSA. If you 

have any questions or need additional information regarding this submission, please feel free to 

contact us at (704) 987-0533. 

Respectfully, 

Larry H. Goldbrum 

General Counsel