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July 21, 2015

VIA EMAIL 

(e-ORI@dol.gov and e-OED@dol.gov) 

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule

U.S. Department of Labor

200 Constitution Avenue, NW, Room N-5655

Washington, D.C. 20210

Office of Exemption Determinations

Employee Benefits Security Administration

Attn: D-11712

U.S. Department of Labor 

200 Constitution Ave NW, Suite 400

Washington, DC 20210

Re: Definition of the Term “Fiduciary”; Conflict of Interest Rule (RIN 1210-AB32)

Proposed Best Interest Contract Exemption (ZRIN 1210-ZA25)

Dear Sir or Madam:

The Plan Sponsor Council of America (“PSCA”) appreciates the opportunity to comment 

on the Department of Labor’s (“DOL”) proposed changes to the definition of a “fiduciary” under 

the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal 

Revenue Code of 1986, as amended (“Code”),1 and its proposed “Best Interest Contract 

Exemption” (the “BIC Exemption”)2 (collectively referred to as the “Proposed Rule”).3

PSCA was established in 1947 and is a diverse, collaborative community of employee 

benefit plan sponsors, working together on behalf of more than six million employees to solve 

real problems, create positive change and expand on the success of the voluntary employersponsored retirement system. Representing employers of all sizes and industries, we offer a 

unique forum for comprehensive dialogue. It is from this perspective that PSCA is providing its 

response to the Proposed Rule. 

I. Background

Over the past 40 years, the way in which Americans save for retirement has evolved 

dramatically. As a result, the market for retirement advice has also changed. According to DOL

statistics, taken from a period ending in 2007 that nonetheless illustrates current trends,

 1 80 Fed. Reg. 21,927 (Apr. 20, 2015).

2 Id. at 21,960. 3 Id. at 22,004; Id. at 22,010; Id. at 22,021; Id. at 22,035.
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employer-sponsored retirement plan participation grew 102.1 percent (from 42.7 million to 86.3 

million) between 1977 and 2007.4 During this time, the number of participants in defined 

contribution plans increased 358 percent (from 14.6 million to 66.9 million), while participants 

in defined benefit plans decreased 31 percent (from 28.1 million to 19.4 million).5

 

During this era of rapid growth, the total value of employer-sponsored retirement plans 

grew substantially from approximately $325 billion in 1977 to more than $7 trillion in 2012. 

Much of this growth can be attributed to increased worker participation, as well as significant 

investment returns during the 30-year period, according to a 2010 report by the Treasury 

Inspector General for Tax Administration.6

Additionally, we have seen significant growth in IRAs – in both the number of accounts 

and in total account balances. Between 2004 and 2007, an average of about 15 million workingage Americans saved for retirement through individual retirement plans.7 This is about eight

percent of the working age population.8 By the end of the third quarter of 2014, IRAs held more 

than $7 trillion in assets, representing 30 percent of total retirement market assets in the U.S., 

compared to 18 percent two decades ago.9

Amid this changing landscape, the role of a fiduciary is even more critical. PSCA 

applauds the DOL’s continued efforts to update this standard to reflect the evolved investment 

and savings landscape. Moreover, PSCA appreciates that the DOL carefully considered – and 

took into account – many of the comments and recommendations PSCA has made on this very 

important topic over the years (including during the review stage for this prior version of this 

proposed rule). 

II. Overview of PSCA Comments

PSCA supports the core approach of the Proposed Rule in extending the protection of 

ERISA’s fiduciary standards. Indeed, we believe our retirement system will be greatly 

strengthened by ensuring that investment advice is provided in the recipient’s best interest

consistent with those fiduciary standards and that any financial conflicts are disclosed. 

Nevertheless, after many weeks of discussions amongst our members, there remains uncertainty 

about the distinction between “investment advice” and “recommendations,” as well as mere 

“neutral, informative descriptions” of plan or IRA operations and “factual comparisons” of 

investment options or taxation of those options. Our concern is that this uncertainty may 

potentially impact the availability of valuable plan administration and investment education 

services.

 4 Copeland, Craig, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2012,” 

EBRI Issue Brief, no. 392, November 2013.

5 Treasury Inspector General for Tax Administration, Final Report on Statistical Trends in Retirement Plans, 

available at http://www.treasury.gov/tigta/auditreports/2010reports/201010097fr.html.

6 Id.

7 Id.

8 Id.

9 Id.
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While we fully support the DOL’s efforts to protect plan participants by extending 

ERISA’s fiduciary standards in appropriate circumstances, we hope that this objective can be 

met without compromising the ability of plan sponsors to obtain the broad array of services that 

fit the needs of their plan participants. For instance, we want to ensure that the Seller’s Exception 

and carve-outs for platform providers do not unintentionally limit access to robust platforms and

other important services that are particularly important for small plan sponsors.

We also hope a formulation can be found that ensures plans of all sizes will continue to 

offer meaningful investment education to participants. We believe that investment education is a 

critical component to ensuring the success of today’s current retirement savings landscape. In 

this regard, PSCA supports the continued use of 29 C.F.R. Section 2509.96-1 (“IB 96-1”) as the 

framework for the carve-out, without the proposed limitations designed to deny IB 96-1 

protection if education addresses a plan’s specific fund line-up. We believe that IB 96-1 has 

worked well over the years and has provided participants and plan sponsors with a workable and 

reliable distinction between what is investment education and what is investment advice. At the 

very least, the limitation should not apply where the provider of investment education lacks a 

conflict with respect to any of the funds in the plan’s line-up.

After listening to comments from other groups and members of the provider community, 

it appears that many concerns rest upon an overly broad reading of the Proposed Rule’s scope. In 

clarifying that scope as limited to persons or entities rendering investment advice for a fee, it 

may be helpful if the final regulation includes additional examples or model language that 

sharpens the distinction between investment “recommendations” and mere “neutral, informative 

descriptions” of plan or IRA operations, investment options or taxation. 

The remaining portions of this letter focus on the specific aspects of the Proposed Rule 

on which PSCA wishes to comment. To the extent PSCA identifies any additional concerns or 

insights with respect to the Proposed Rule, PSCA may provide the DOL with additional 

comments.

III. Revised Fiduciary Investment Advice Definition

The Proposed Rule replaces the current five-part test for determining whether a person is 

deemed to render “investment advice” within the meaning of ERISA Section 3(21)(A)(ii). 

Specifically, the Proposed Rule defines a fiduciary as a party that provides investment 

recommendations, investment management recommendations, appraisals of investments or 

recommendations of persons that provide investment advice for a fee or manage plan assets – to 

the extent such party receives a fee or other compensation (directly or indirectly) for such advice 

if they either acknowledge fiduciary status or provide their advice under an agreement, 

arrangement or understanding that the advice is individualized or specifically directed to the 

advice recipient for consideration in making investment or management decisions regarding plan 

or IRA assets.10

 10 Prop. Reg. 29 C.F.R. §2510.3-21(a).
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A. PSCA supports repeal of the five-part test but is concerned with the broad nature of 

the Proposed Rule.

PSCA supports the repeal of the current five-part test and agrees that the current 

regulation is outdated and no longer reflects the current retirement landscape. Moreover, a 

revised regulation is consistent with PSCA’s general support for the core approach of the 

Proposed Rule and the extension of fiduciary status under appropriate circumstances. More 

specifically, many PSCA members regard the proposed revision as beneficial in solving a crucial 

problem in their efforts to help employees save for retirement. While 98% of plan sponsor 

respondents in PSCA’s 57th Annual Survey indicated that lump sum distributions were one of 

the retirement distributions offered, only 41.4% of those same plan sponsors provided education 

to participants taking a retirement distribution beyond the required government notices. PSCA 

views this proposed revision as a means to protect pre-retirees and retirees as they near the point 

at which they begin the de-accumulation phase. Nevertheless, PSCA has concerns about the 

broad nature of the Proposed Rule.

To be considered an investment advice fiduciary under the Proposed Rule when a person 

does not acknowledge fiduciary status, such person must “[r]ender the advice pursuant to a 

written or verbal agreement, arrangement or understanding that the advice is individualized to, or 

that such advice is specifically directed to, the advice recipient for consideration in making 

investment or management decisions . . . .”11

PSCA appreciates that the DOL provided clarification in the preamble that this provision 

“avoids treating recommendations to the general public . . . as investment advice and thus 

addresses concerns that the general circulation of newsletters, television talk show commentary, 

or remarks in speeches . . . would result in the person being treated as a fiduciary.”12 However, 

our members have raised concerns that the preamble does not provide enough specifics in typical 

situations. One example is how the rule might apply to employee call centers. The broad and 

undefined nature of the phrases “individualized to” and “specifically directed to” could lead to 

confusion and unintended consequences. Accordingly, PSCA recommends that the DOL 

provide additional clarification on the intent and scope of this definition. 

B. PSCA supports repeal of advisory opinion 2005-23A and requests revision of the 

term “recommendation.”

As part of its new definition, the Proposed Rule defines investment recommendations to

include a recommendation to take a distribution from a plan or IRA, as well as a 

recommendation as to the investment of assets distributed or rolled over from a plan or IRA.13

Consequently, the Proposed Rule would supersede existing DOL guidance in Advisory Opinion 

2005-23A, holding that a party does not give fiduciary investment advice when it makes a 

recommendation as to distribution options even if that recommendation includes a 

 11 Prop. Reg. 29 C.F.R. §2510.3-21(a)(2)(ii). 12 80 Fed. Reg. at 21, 940. 13 Prop. Reg. 29 C.F.R. §2510.3-21(a)(i).
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recommendation as to the investment of the distribution.

14 PSCA previously recommended this 

approach and, subject to the concerns set forth below, generally supports this revised position. 

The Proposed Rule defines the term “recommendation” to mean “a communication that, 

based on its content, context, and presentation, would reasonably be viewed as a suggestion that 

the advice recipient engage in or refrain from taking a particular course of action.”15 PSCA is 

concerned about the breadth of this definition and that almost any information provided to a 

participant can be interpreted as a “recommendation.” This concern is particularly relevant in the 

context of IRA rollovers, in which the much-needed dissemination of basic information (e.g., 

plan distribution options, taxation considerations and other related implications of a distribution 

and/or rollover) should not be treated as an investment recommendation for this purpose. 

The Proposed Rule asks whether the DOL should adopt some or all of the standards 

developed by FINRA in defining communications that rise to the level of a recommendation for 

purposes of distinguishing between investment education and investment advice under ERISA.16 

PSCA agrees with these principles inasmuch as they help to further distinguish between 

recommendations and non-recommendations not on the existence of a mere suggestion, but 

instead on whether there has been a “call to action.”17 Accordingly, PSCA recommends that the 

DOL revise the definition of the term “recommendation,” by including the concepts that the 

recommendation rises to the level of a “call to action” as set forth in FINRA’s Policy Statement 

01-23, in order to be treated as a recommendation for purposes of determining whether 

investment advice has been rendered.

C. PSCA recommends revising definition of “IRA” and addressing other non-ERISA 

accounts in separate guidance.

The preamble to the Proposed Rule notes that the term “IRA” is inclusively defined to 

include certain non-ERISA plans such as Health Savings Accounts, Archer Medical Savings 

Accounts and Coverdell Education Savings Accounts. The preamble also asks whether it is 

appropriate to treat these plans in a manner similar to IRAs and subject them to both the 

underlying rule and the applicable carve-outs as set forth in the Proposed Rule.18 PSCA 

generally believes that the Proposed Rule should not apply to welfare plans. Instead, if the DOL 

 14 See also 80 Fed. Reg. at 21, 939. 15 Prop. Reg. 29 C.F.R. §2510.3-21(f)(1). 16 80 Fed. Reg. at 21,938.

17 FINRA Policy Statement 01-23 (April 2001) (“As illustrated by the examples provided below, the “facts and 

circumstances” determination of whether a communication is a “recommendation” requires an analysis of the 

content, context, and presentation of the particular communication or set of communications. The determination of 

whether a “recommendation” has been made, moreover, is an objective rather than a subjective inquiry. An 

important factor in this regard is whether – given its content, context, and manner of presentation – a particular 

communication from a broker/dealer to a customer reasonably would be viewed as a “call to action,” or a suggestion 

that the customer engage in a securities transaction.”) (emphasis added).

18 80 Fed. Reg. at 21,947.
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wishes to further consider the application of the Proposed Rule to these plans, PSCA believes 

that it would be more appropriate for the DOL to do so in separate guidance. 

IV. Investment Education Carve-out

The Proposed Rule includes a similar exception for the same general types of information 

not treated as investment advice as under IB 96-1 (i.e., plan information; general financial, 

investment and retirement information; asset allocation models; and interactive investment 

material). While the Proposed Rule incorporates most of IB 96-1,

19 it does, however, make

several major changes: 

• It adds an explicit condition that the information cannot include any advice or 

recommendations as to specific investment products, investment managers, or the value 

of investments.20

• It does not incorporate paragraphs (d)(3)(iii) and (4)(iv) from IB 96-1. Therefore, 

education materials that include asset allocation models or interactive investment 

materials cannot identify specific investment alternatives available under the plan for 

those models or materials to come within the carve-out.21

• The scope of the carve-out is expanded to apply to IRAs and to ERISA plans that do not 

provide for participant-directed investment, and to cover communications to plan 

fiduciaries and IRA owners.22

A. Current guidance should be preserved.

PSCA believes that IB 96-1 in its entirety is the right framework for this carve-out. While 

the Proposed Rule’s language provides some welcomed clarification that PSCA supports and 

wishes to become finalized, PSCA is concerned about the negative unintended consequences 

related to the Proposed Rule’s failure to incorporate paragraphs (d)(3)(iii) and (4)(iv) from IB 

96-1. Accordingly, PSCA recommends that the DOL preserve IB 96-1 in its entirety and amend 

the Proposed Rule to clarify that investment education materials that include asset allocation 

models or interactive investment materials can identify specific investment alternatives available 

under the plan.

1. There is no evidence of abuse.

The preamble states that the DOL is concerned that even when accompanied by a 

statement as to the availability of other investment alternatives, asset allocation models and 

interactive investment materials identifying specific investment alternatives function as “tailored, 

 19 Id.

20 80 Fed. Reg. at 21,944.

21 Id. at 21,945.

22 Id. at 21,944.
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individualized investment recommendations, and can effectively steer recipients to particular 

investments, but without adequate protections against potential abuse.”23 However, the Proposed 

Rule does not provide any studies and/or examples showing any abuse or harm since IB 96-1 

was issued. 

Instead, PSCA believes that IB 96-1 works well. We believe IB 96-1 provides a reliable 

and workable model with which plan sponsors, service providers, participants and other 

stakeholders are familiar. This familiarity and reliability would only become more important as 

the marketplace adjusts to the changes of the Proposed Rule.

2. Identification of specific investment options increases value, effectiveness of 

investment education.

While PSCA understands the DOL’s concern about steering participants to particular 

investments, it believes that the identification of specific investment options in asset allocation 

models and interactive investment materials helps participants understand and “connect the dots” 

between general information on asset allocation and corresponding investment(s) in a plan. 

Importantly, one without the other runs the risk of failing to educate a participant on how to 

effectively use an employer’s plan – a net detriment to his or her best interest. Accordingly, 

PSCA believes that the Proposed Rule could decrease the value and effectiveness of investment 

education.

PSCA’s 57th Annual Survey results show that the most common reasons for providing 

education among plans (of all sizes) were to increase participation (77.5 percent), increase 

appreciation for the plan (72.9 percent), and increase deferrals (74.9 percent). For plans with 1-

49 participants, 78.1 percent of respondents indicated that plan education was provided to 

increase appreciation for the plan. We believe that without the tie-in to specific investment 

options under a plan, the risk that a participant fails to fully appreciate, learn from the education, 

and actually use the plan would increase.

Our concern is best demonstrated by the following anecdote given by one of our plan 

sponsor members:

We hired XYZ to provide investment education services to our employees. They 

offer a robust program that tailors the educational opportunities for early-, midand late-career employees. One thing we really like about the program is that if a 

participant wants to learn more than just the general information from online and 

various program seminars, he or she can schedule a telephone call with an XYZ 

certified financial planner and talk about factors specific to the employee. For 

example, benefit opportunities inside and outside of the employer, prior 

marriages, etc. The certified financial planner uses this information, as well as the 

employee’s risk tolerance and time horizon to help construct a broad asset 

allocation model based on the employee’s personal circumstances. What we have 

noticed when we have looked in the past at IB 96-1 is that the XYZ representative 

 23 See 80 Fed. Reg. at 21,945. 
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would be able to utilize our plan’s investment options to provide examples of 

what the plan currently offers to satisfy an allocation in the model provided to the 

participant. For example, “the asset allocation model suggests investing x% in 

large cap equities; the plan currently offers these funds as large cap equity options 

. . .” We believe that this last step – connecting the asset allocation model with 

specific investment options under the plan – ties it all together for the participant. 

In our experience, participants are well aware that the references to specific 

investment options are intended to constitute education, not advice. We are 

concerned that the proposed regulation would prohibit our educational service 

provider from helping the participant connect the dots. 

3. Plan sponsors are concerned with potential unintended consequences.

PSCA members are concerned that a narrowed IB 96-1 could have unintended 

consequences that would be particularly harmful to small employers and participants. For 

instance, in addition to decreasing the value and effectiveness of investment education (as 

discussed above), plan sponsors are concerned that the availability of educational services will be 

limited or become more costly. That is, if what is currently available as education becomes 

“investment advice,” providers may no longer offer these services or will impose advisory-level 

fees, making the information unattainable for many employees.

Additionally, participant outcomes for smaller plan sponsors may be jeopardized because 

of the additional burdens imposed on sponsors and their participants. For instance, our survey 

indicates that of plans with 50-199 participants that offer retirement planning education, only 

27.1 percent of plan sponsors created the education themselves. Instead, 70.6 percent rely on a 

third-party. Conversely, of plans with 5,000 or more participants, 57.7 percent of plan sponsors 

offered investment education themselves, and 54 percent indicated relying on a third party.

Imposing the burden of developing these programs without the help of their providers could 

impact small employers’ willingness to establish or maintain plans. Also, the absence of these 

helpful asset allocation models and interactive investment materials would increase decisions 

required of participants during plan enrollment and investment selection processes. This, in turn, 

would undermine sponsors’ efforts to increase appreciation for and participation to the plan.

While any discussion about a proposed regulation’s potential impacts in the marketplace 

necessarily involves a degree of speculation, PSCA nonetheless believes there are legitimate 

concerns regarding unintended consequences. Accordingly, PSCA hopes the DOL will be 

responsive to these concerns as it continues to refine this carve-out.

4. DOL concerns can be addressed without eliminating ability to identify specific 

investment options.

To the extent the DOL is unwilling to preserve IB 96-1 in its entirety, PSCA believes 

there are ways to permit the identification of specific investment options without risking the 

abuses described by the DOL if certain principles are taken into account. For example, proposals 

that are based on neutral, informative descriptions of the participant’s options should be 

permissible under the carve-out. In providing this neutrality, the focus should be on the factually 
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comparative nature of the information and whether it is being provided in a manner that does not 

rise to the level of a recommendation. PSCA offers to serve as a resource as the DOL continues 

to evaluate the right standard for this carve-out and is willing to work with the DOL to help 

identify solutions that address any concerns without eliminating the ability to identify specific 

investment options. In this regard, both the DOL and PSCA have been weighing the pros and 

cons of alternatives such as (this is not an exhaustive list):

• permit the identification of specific investment options when the education is paid for 

on a fixed and unconflicted basis;

• permit the identification of specific investment options when the education is 

provided by an independent third-party;

• permit the identification of specific investment options when the education discloses 

each available plan option in a given asset class; and/or

• permit plans to continue relying on paragraphs (d)(3)(iii) and (4)(iv) of IB 96-1, but 

do not extend this ability to IRAs (i.e., the marketplace for employee benefit plans is 

considerably different from the marketplace for IRAs since while IRA owners have 

access to an unlimited universe of investments, plan participants and beneficiaries 

select investments from a lineup selected by prudent plan fiduciaries.).

Each of these alternative solutions may address the concerns raised by the DOL and would 

permit plan sponsors to continue (albeit potentially at a greater cost) to provide valuable 

education in certain instances. However, as noted above, PSCA believes that service providers 

should be able to identify specific investment options under the principles established in IB 96-1 

although it may be that certain service providers should be subject to additional conditions to 

ensure the neutrality described. Forcing plan sponsors in all cases to use an independent third 

party to provide education could increase plan costs as well as make it potentially more 

complicated for the participants. Again, PSCA welcomes the opportunity to work with the DOL 

as it considers these and other alternatives.

5. PSCA supports additional language clarifying the carve-out’s scope.

The Proposed Rule includes language intended to clarify that the Investment Education

carve-out (i) applies equally to information provided to plan fiduciaries as well as to participants, 

beneficiaries, and IRA owners, (ii) applies equally to participant-directed plans as well as to 

other plans, and (iii) applies without regard to whether the information is provided by a plan 

sponsor, fiduciary, or service provider.24 Additionally, the Proposed Rule includes language 

clarifying that fiduciary status would not arise from the provision of general information about 

determining retirement income needs past retirement and any associated risks, as well as general 

methods for managing those risks both within and outside a plan.25 PSCA believes that this 

language provides a welcomed clarification and accordingly, supports the inclusion of these 

provisions in the final rule.

 24 Id. 25 Id.
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V. Employee Carve-out 

The Proposed Rule provides that employees of an ERISA plan sponsor would not be 

investment advice fiduciaries with respect to advice they provide to fiduciaries of the sponsor’s 

plan so long as such employees do not receive compensation for the advice beyond their normal 

compensation.26 This carve-out is intended to address concerns that internal employees of plan 

sponsors should not be treated as fiduciaries because their advice is largely incidental to their 

work duties and they receive no additional compensation for providing such advice.27

A. PSCA supports the employee carve-out and requests clarification on advice 

provided to non-fiduciary employees.

PSCA supports the employee carve-out. We agree with the DOL that employees of an 

ERISA plan sponsor should not be considered investment advice fiduciaries with respect to 

advice they provide to fiduciaries of their employer’s plan so long as they do not receive 

compensation for their advice beyond normal compensation.

One issue raised during our review of this carve-out relates to a situation involving two or 

more non-fiduciary employees of an ERISA plan sponsor (e.g., Employee A and Employee B). 

In this situation, Employee A provides investment advice to Employee B. Then, Employee B 

provides that advice to the proper plan fiduciaries. Neither Employee A nor Employee B receives 

compensation beyond their normal compensation and such advice is largely incidental to their 

work duties. 

The Proposed Rule states that the employee carve-out applies when “the person provides 

the advice to a plan fiduciary . . . .”28 Thus, a strict reading of the Proposed Rule indicates that 

Employee B would satisfy the carve-out. However, it suggests that Employee A would not, 

despite the DOL’s recognition that “internal employees, such as members of a company’s human 

resources department, routinely develop reports and recommendations for investment 

committees and other named fiduciaries of the sponsors’ plans, without acting as paid fiduciary 

advisers.”29

Accordingly, PSCA recommends that the DOL clarify in the final regulation that the 

carve-out would apply broadly in this situation to cover individuals such as Employee A.

VI. Platform Providers, Selection and Monitoring Assistance

The Proposed Rule provides a carve-out for service providers (e.g., recordkeepers or 

third-party administrators) that market or offer investments through a platform or similar 

mechanism from which a plan fiduciary may select or monitor investment alternatives for 

participants and beneficiaries to direct the investment of their plan accounts, so long as the 

 26 Prop. Reg. 29 C.F.R. §2510.3-21(b)(2). 27 80 Fed. Reg. at 21,943. 28 Prop. Reg. 29 C.F.R. §(b)(2).

29 80 Fed. Reg. at 21,943.
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provider conducts its activities without regard to the individual needs of the plan or its 

participants and beneficiaries and the provider discloses in writing to the plan fiduciary that it is 

not giving advice in a fiduciary capacity.30 An additional carve-out would allow platform 

providers for participant-directed individual account plans to provide information limited to 

investment alternatives that meet objective criteria specified in advance by the plan fiduciary and 

objective financial data and comparisons with independent benchmarks.31

A. PSCA supports platform provider carve-outs and requests clarification on 

ambiguities.

PSCA supports the Proposed Rule’s carve-outs for platform providers. Indeed, the carveout would ensure the continuation of a vibrant marketplace for service providers offering 

platforms for the selection of investment vehicles for individual-account plans – this is critically 

important for the plan sponsor community. As such, PSCA wants to ensure that these carve-outs 

do not unintentionally limit access to robust platforms for all plan sponsors. Despite its general 

support for these carve-outs, PSCA perceives certain proposed language to be ambiguous and 

seeks DOL’s clarification as to their scope and applicability. Accordingly, PSCA is concerned 

about the harmful impacts that could arise from this uncertainty, particularly with respect to 

small plan sponsors.

In relevant part, the carve-out for platform providers would apply if “[t]he person merely

markets and makes available to an employee benefit plan . . . without regard to the 

individualized needs of the plan, its participants, or beneficiaries, securities or other property

through a platform or similar mechanism . . . .”32 Unfortunately, the preamble does not offer 

much help in understanding what it means to “merely” market or to make a platform or similar 

mechanism available without regard to “individualized needs.”33 Similarly, the carve-out for 

selection and monitoring assistance would apply if the person “merely identifies investment 

alternatives that meet objective criteria”34 or “merely provides objective financial data and 

comparisons with independent benchmarks to the plan fiduciary.”35

These carve-outs are intended to address common practices and recognize circumstances 

where the platform provider and the plan fiduciary both understand that the provider has 

financial interests with the offered investments, and where the plan fiduciary knowingly accepts 

that the platform provider is not purporting to provide investment advice.36 However, having 

 30 Prop. Reg. 29 C.F.R. §2510.3-21(b)(3). 31 Prop. Reg. 29 C.F.R. §2510.3-21(b)(4). 32 Prop. Reg. 29 C.F.R. §2510.3-21(b)(3).

33 80 Fed. Reg. at 21,943 (“The carve-out merely makes clear that persons would not act as investment advice 

fiduciaries simply by marketing or making available such investment vehicles, without regard to the individualized 

needs of the plan or its participants and beneficiaries, as long as they disclose in writing that they are not 

undertaking to provide impartial investment advice or to give advice in a fiduciary capacity.”) (emphasis added).

34 Prop. Reg. 29 C.F.R. §2510.3-21(b)(4)(i). 35 Prop. Reg. 29 C.F.R. §2510.3-21(b)(4)(ii). 36 80 Fed. Reg. at 21,943.
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affordable access to robust platforms is extremely important to the plan sponsor community. 

Since 2002, PSCA plan sponsor survey data reflects an expansion of investment options offered 

by plan fiduciaries (from 14 to 19). Thus, PSCA is concerned that the expanding array of 

investment options that have become so common may decline or become more expensive 

without more specificity. Accordingly, PSCA requests that the DOL provide more certainty 

within the language of the final regulation (or its preamble).

B. PSCA requests clarification regarding RFPs and “Mapping.”

Several of our members noted that the ambiguity contained in the carve-outs would 

create problems in responding to a plan sponsor’s request for proposal (“RFP”), where the 

service provider merely prepares a sample line-up in response to such an RFP. While plan 

sponsors sometimes will provide specific criteria from which to create a proposed investment 

line-up, in many situations plan sponsors at this point in the process provide no criteria at all. 

Similarly, plan sponsors seeking to replace funds within their investment line-up tend to request 

information for “mapping” alternatives from their providers. In both scenarios, the investment 

alternatives identified by the provider serve as a starting point for review and decision by the 

plan fiduciaries. Without an ability to continue these practices, plan sponsors would be faced 

with the burden of analyzing the full platform of their provider, or of the multiple providers from 

whom they request a proposal. PSCA urges the DOL to provide clarification for providers with 

respect to the RFP and fund replacement processes. 

C. PSCA believes carve-outs should not be limited to large plan sponsors.

PSCA recommends retaining the current construct of the carve-out so that it applies to 

plan sponsors of all sizes. PSCA does not support limiting the platform provider carve-outs to 

large plan sponsors for several reasons. As further described below, extending the carve-out to 

plans of all sizes would be more consistent with core ERISA fiduciary principles, would 

recognize that small plan sponsors are equally capable of understanding when a platform 

provider has financial interests, and would avoid the imposition of difficult administrative issues 

and added costs that could prove harmful to small plan sponsors and their plan participants.

As the DOL is aware, ERISA provides that a fiduciary must discharge his responsibility 

“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.”37 The scope of this duty is not conditioned 

upon the relative size of the plan sponsor. Rather, it applies equally to plan sponsors of all sizes.

Thus, applying the carve-outs regardless of size simply is more consistent with this fundamental 

ERISA obligation.

PSCA believes a decision by the DOL to exclude small plans from the platform provider 

carve-out would create confusion in the marketplace and potentially create an undue burden to 

certain small plan sponsors. Limiting the carve-out to large employers would in essence make 

every platform available to a small employer an advisory product. PSCA believes that small 

 37 ERISA §404(a)(1)(B).
13

plan sponsors who want to use a platform but do not need to obtain related investment advice 

should not be subjected to the related increased costs of an advisory platform. In practical terms, 

PSCA agrees with the DOL that some small plan sponsors may not be as sophisticated as large 

plan sponsors and that those small plan sponsors should be protected when they obtain 

investment advice from a service provider. However, and as noted above, plan sponsors of all 

sizes are obligated to understand and uphold their fiduciary duties. There clearly are many small 

plan sponsors who – for various reasons – would benefit from having the same platform provider 

carve-out option that large plan sponsors have. 

Importantly, investment sophistication is a matter of sophistication – not size. For 

example, a small plan sponsor that employs a sophisticated Chief Financial Officer may prefer to 

work with a service provider with access to a platform of investment options. If the plan 

fiduciary for that employer is comfortable making investment selection decisions and does not 

need the investment advice from the service provider, then excluding that small employer from 

the platform provider carve-out exposes that employer to the risk of greater administrative 

burdens and costs without a corresponding gain. Today’s marketplace makes investment advice 

available to those sponsors who need it. The disclosures required by the carve-out will help any 

size plan sponsor understand that investments presented within a platform are not intended to be 

fiduciary recommendations. Solidifying this understanding will help employers, who need this 

assistance, realize they must seek it through already available, but separate, services.

In addition, PSCA believes that an undue burden will befall plan sponsors if the platform 

provider carve-out is applied on a size basis as plans grow or decline in size since it is unclear 

how the use of platforms would be expected to change as the applicable threshold is crossed in 

either direction. Small plan sponsors are just as capable of recognizing that platform providers

have financial interests with the offered investments and of understanding when they are 

providing investment advice. Moreover, the DOL already has promulgated regulations intended 

to address concerns about the ability of plan fiduciaries to evaluate service provider 

compensation and evaluate potential conflicts of interest.38 PSCA understands that the DOL may 

have concerns with respect to extremely small plans that are akin to IRAs. As such, if the DOL is 

unwilling to retain the platform provider carve-outs to plans of all sizes, PSCA recommends that 

the DOL consider adopting a rule that only plans with a very small plan participation base (e.g., 

between 5 and 20 employees) be excluded from the carve-out. 

VII. Financial Reports and Valuations

The Proposed Rule provides a carve-out for providers of valuations and fairness opinions 

for employer stock in connection with an ESOP and providers of appraisals and valuations for 

collective investment funds or pooled separate accounts that hold assets of multiple, unaffiliated 

plans. Additionally, a provider of valuation information to a plan, plan fiduciary, participant or 

beneficiary or an IRA or IRA owner also would not be a fiduciary under the carve-out where 

 38 29 C.F.R. §2550.408B-2(c) (requiring covered service providers to disclose information about services it provides 

and compensation it expects to receive in connection with a contract or arrangement with a covered plan).
14

such information is used solely for complying with reporting requirements applicable to the plan 

or IRA or in communications needed to comply with applicable disclosure requirements.39

A. PSCA supports final reports/valuation carve-out and requests clarification on 

investment funds carve-out.

PSCA generally supports this carve-out. However, some members have expressed 

confusion with respect to the carve-out related to valuations or appraisals provided to investment 

funds. Specifically, the preamble indicates that the investment fund carve-out applies to an 

investment fund holding assets of at least one plan or IRA: “the proposal also contains an 

entirely new carve-out at paragraph (b)(5)(ii) specifically addressing valuations or appraisals 

provided to an investment fund (e.g., collective investment fund or pooled separate account) 

holding assets of various investors in addition to at least one plan or IRA.”40 However, the 

language of the Proposed Rule indicates that to qualify, the investment fund requires more than 

one plan or IRA: “An investment fund, such as a collective investment fund or pooled separate 

account, in which more than one unaffiliated plan has an investment, or which holds plan assets 

of more than one unaffiliated plan under 29 CFR 2510.3-101.”41

Accordingly, PSCA recommends that the final regulation clarify that only one plan or 

IRA is needed to qualify for the investment fund carve-out.

VIII. The Seller’s Exception

The Seller’s Exception applies to communications made in connection with an arm’s 

length sale, purchase, loan or bilateral contract (or a proposal to enter into one of those 

transactions) by an adviser to an independent plan fiduciary.42 Generally, this carve-out provides 

two alternative sets of conditions that must be met to qualify for this exception. One applies 

where the transaction is conducted with a plan that has 100 or more participants and the 

counterparty knows or has reason to know that the independent fiduciary acting on behalf of the 

plan “has sufficient expertise to evaluate the transaction.”43 The other applies to transactions 

with a plan represented by an independent fiduciary with responsibility for managing at least 

$100 million in assets.

A. PSCA supports Seller’s Exception and recommends expanding to smaller plan 

sponsors.

PSCA applauds the DOL for including this exception in the Proposed Rule and agrees 

that such activities should not constitute the provision of advice. Rather, the described activities 

are more in the nature of a sales pitch. PSCA generally supports this carve-out. However, it 

 39 Prop. Reg. 29 C.F.R. §2510.3-21(b)(5). 40 80 Fed. Reg. at 21,939. 41 Prop. Reg. 29 C.F.R. §2510.3-21(B)(5)(ii). 42 Prop. Reg. 29 C.F.R. §2510.3-21(b)(1). 43 Id. at §2510.3-21(b)(1)(i)(B)(4).
15

recommends expanding it to plan sponsors of all sizes, or alternatively, to only exclude from the 

exception, plans with a smaller participant threshold (e.g., between 5 and 20 employees).

PSCA supports an expanded carve-out for the same reasons it does not support limiting 

the platform provider carve-outs to large plan sponsors. First, expanding the carve-out to plan 

sponsors of all sizes would be more consistent with core ERISA fiduciary principles, which 

apply regardless of plan sponsor size. Second, PSCA believes that small plan sponsors, aided by 

the service provider fee disclosure regulation, are equally capable of distinguishing between a 

sales pitch and advice. Lastly, imposing a limit may lead to difficult administrative issues that 

could prove costly and detrimental to small employers. 

Like the carve-outs for platform providers, PSCA understands that the DOL has concerns 

with respect to extremely small plans that are akin to IRAs. As such, if the DOL is unwilling to 

extend the Seller’s Exception to plans of all sizes, PSCA recommends that the DOL lower the 

threshold to smaller plans, such as between 5 and 20 participant plans.

IX. Best Interest Contract Exemption 

The Proposed Rule’s best interest contract exemption (the “BIC Exemption”) would 

provide prohibited transaction relief for the receipt of compensation by investment advice 

fiduciaries and their affiliated financial institutions for services provided in connection with the 

purchase, sale, or holding of certain investments by participants and beneficiaries, IRAs, and 

certain plans with fewer than 100 participants (the “Retirement Investor”). Generally, the 

fiduciary adviser and affiliated financial institution would be required to enter into a written 

contract with the Retirement Investor prior to recommending any investment. Additionally, the 

BIC Exemption would require a number of disclosures to the Retirement Investor – including (1) 

a description of material conflicts of interest; (2) a statement informing the Retirement Investor 

that it has the right to obtain complete information about all fees related to its investment; and (3)

a statement as to whether the financial institution offers any products or receives any third-party 

payments with respect to any underlying investments.

A. PSCA supports the BIC Exemption’s principles-based approach but is 

concerned with the written contract and disclosure requirements.

Like the DOL, PSCA is concerned with plan participants’ transition from qualified plans 

to retail investment vehicles. We believe it is crucial that plan participants receive sound and 

unbiased guidance on options available to them prior to making a decision that could have 

profound effects on their retirement nest egg. PSCA supports the idea of a flexible, principlesbased framework for providing exemptive relief for investment advice fiduciaries. We agree 

with the DOL that doing so will permit plan sponsors to continue to rely on common fee 

practices while allowing such investment advice fiduciaries to continue to receive a wide variety 

of compensation. 

The preamble states that “[i]t is intended that the [BIC Exemption] will ease compliance 

costs and reduce complexity while promoting the provision of investment advice that is in the 
16

best interest of Retirement Investors.”44 PSCA supports this concept and believes that this should 

be the guiding principle with respect to the BIC Exemption. However, PSCA is concerned that 

the BIC Exemption’s written contract and multiple disclosure requirements may not fulfill the 

stated intent of easing compliance costs and reducing complexity. 

1. Written Contract Requirement

As mentioned above, in order to receive exemptive relief under the BIC Exemption the 

adviser and his or her financial institution must enter into a written contract with the Retirement 

Investor prior to recommending any investment. The preamble indicates that the DOL intends for 

the written contract requirement to be the “cornerstone” of the BIC Exemption, creating a basis 

upon which its rights can be enforced by the Retirement Investor through a private right of action 

for breach of contract. 

In addition to acknowledging fiduciary status, the written contract would require the 

adviser and his or her financial institution to agree to comply with certain impartial conduct 

standards, including a best interest standard defined to effectively mirror the ERISA Section 404 

duties of prudence and loyalty. When combined with the various proposed warranties, 

disclosures and prohibited contractual provisions, the proposed written contract requirement

indeed would create a basis upon which its rights could be enforced by the Retirement Investor 

through a private right of action for breach of contract. However, after listening to comments 

from other groups and the provider community, PSCA is concerned about the written contract 

requirement’s complexity and potential expense, as well as the likelihood of significant practical 

difficulties. 

As an alternative to the BIC Exemption’s version of a written contract requirement, 

PSCA believes there are other, less complex measures that could accomplish the same goals, 

such as through a web-based or email-based exchange of information and consent that is 

paperless but still creates enforceable rights. Alternatively, the DOL could consider replacing the 

BIC Exemption’s current contract requirement with a unilateral contractual arrangement that 

contains the same contractual provisions as currently required (e.g., the ability to bring a private 

right of action, the imposition of impartial conduct standards intended to effectively mirror the 

ERISA Section 404 duties of prudence and loyalty, etc.). Such a contract would be structured by 

the financial institution and agreed to by the Retirement Investor through performance. 

Importantly, such an arrangement would not require either party to provide a written signature. 

We believe this approach meets the DOL’s stated objectives for the BIC Exemption. 

Requiring an actual, written contract with signatures could preclude providers from offering, and 

Retirement Investors from accepting, innovative ways to engage in provider/customer 

relationships as the digital world continues to evolve. To align with other currently permitted 

electronic practices, the DOL might also consider a clause allowing Retirement Investors the 

ability to receive paper copies of the agreement or any required disclosures, at no charge to them.

 44 80 Fed. Reg. at 21,966.
17

2. Disclosure Requirements

The BIC Exemption would create significant amounts of additional disclosure 

requirements for investment advice fiduciaries and their affiliated financial institutions. PSCA 

supports a disclosure regime that allows Retirement Investors the ability to access sufficient 

information related to the investment options recommended as well as other investments that 

might be available to them. We fear, however, that the level of material required under the BIC 

Exemption may overwhelm plan participants and become overly burdensome, making it 

unworkable for many service providers. For example, our members have concerns with the 

annual statement and whether it is even feasible to track whether a Retirement Investor has acted 

on the advice provided or simply chosen the investment for other reasons (as it is very common 

for Retirement Investors to not take any action at the time the advice is provided). 

Additionally, our members suggest that, where possible, any potential disclosures 

required by the BIC Exemption leverage other established disclosure regimes. In this regard, 

PSCA recommends that the DOL consider relying on principles of existing regulations such as 

those under the ERISA Sections 408(b)(2) and 404(a) disclosures – rather than devising an 

entirely new set of disclosures that may not be useful and would present enormous complexity 

for those who would need to develop them. Lastly, as the DOL approaches these additional 

disclosures, we ask that the DOL and IRS electronic disclosure requirements be conformed into 

one requirement.

X. Conclusion

PSCA applauds the DOL’s efforts to maximize consumer protection for plan sponsors, 

fiduciaries, participants, beneficiaries, and IRA owners while preserving flexibility within the 

plans. PSCA wishes to be a resource to the DOL and as we continue to further evaluate these 

rules, PSCA may provide additional comments for the DOL’s consideration. We appreciate the 

opportunity to comment and look forward to working with the DOL to achieve these goals. If 

you have any questions, please do not hesitate to contact Tony Verheyen, Executive Director, at 

tony.verheyen@psca.org or (312) 419-1863.

Respectfully submitted,

Plan Sponsor Council of America