September 24, 2015

Office of Regulations and Interpretations

Office of Exemption Determinations 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW 

Washington, DC 20210 

Submitted Electronically – e-ORI@dol.gov and e-OED@dol.gov

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

Contract Exemption (ZRIN 1210-ZA25)

To Whom it May Concern:

Thank you for the opportunity to testify at the recent administrative hearings 

on the proposed regulation (the “Proposal”) redefining the term “fiduciary” with 

respect to the provision of investment advice under ERISA §3(21)(A)(ii),1and the 

proposed prohibited transaction class exemptions, including the “Best Interest 

Contract Exemption” (“BICE”).2 While the U.S. Chamber of Commerce 

(“Chamber”) shares the U.S. Department of Labor’s (the “Department” or “DOL”) 

goal of ensuring ERISA plans, ERISA plan participants and beneficiaries, and 

Individual Retirement Account (“IRA”) owners receive quality financial advice, we 

unfortunately continue to have serious concerns that the Department has chosen an 

approach that is unduly complicated and wrought with serious defects. As such, we 

are writing to submit additional comments on issues raised during the hearings. 

The Chamber believes that the extensive written comments and hearing 

testimony highlight the Proposal’s complexity and flaws, and these cannot be 

corrected without reproposal and additional comments from the regulated 

 

1 80 Fed. Reg. 21,928 (Apr. 20, 2015)

2 Id at 21,960.
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community. The purpose of a reproposal is to ensure that any changes to the 

Proposal have been adequately addressed by the Department in a way that does not 

create new problems. Given the complexity of these issues and the significant 

retirement savings at risk, it is important for the Department to get this “right,” and 

allowing interested parties an opportunity to see the rule again before it becomes final

is essential to that outcome. We emphasize that our goal is not to delay that final rule 

but rather to ensure that the final product released by the Department is workable and 

serves the needs to all plan participants, plan sponsors, and IRA owners. Such a 

reproposal can be accomplished without a significant delay in the rule.

Our additional comments include the following concerns:

 The proposal presents a significantly increased risk of class action 

litigation that will not serve participants’ or IRA owners’ best interests.

 Governmental as well as private entities expressed serious concerns 

about the proposal’s impact on small businesses and individuals.

 “Best Interest” is not a synonym for the ERISA fiduciary standard and 

the associated prohibited transaction rules, which can act against your 

best interest.

 A broad Sellers’ Carve-Out is necessary for all plans and IRAs.

 A Seller’s Carve-Out is necessary for proprietary products due to the 

prohibited transaction rules.

 Transition rules for ongoing arrangements and BICE need to be clarified

and implemented.

 IB 96-1’s language on asset allocation models and representative 

investment options should be retained.
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Employee Benefits Security Administration 

U.S. Department of Labor

September 24, 2015

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 BICE should not limit assets available for investments in IRAs.

 BICE remedy and conduct requirements exceed the Department’s 

regulatory authority.

 Clarification is needed for rollovers and platform carve-outs.

 Disclosure requirements must be modified. 

This letter is in addition to all of our previous comments and testimony 

submitted to the Department—our previous positions remain, and we ask that the 

Department respond to all of our comments. Our concerns are explained in more 

detail below. 

The Extensive Written Comments and Hearing Testimony Highlight the 

Proposal’s Complexity and Flaws—These Cannot Be Corrected Without 

Reproposal and Additional Comments from the Regulated Community

The testimony presented at the hearings highlighted the considerable confusion 

and real-world problems presented by the Proposal, BICE, and the other exemptions 

in the regulatory package. We urge the Department to respond to the serious 

objections raised by the Chamber and many other witnesses at the hearings by 

reproposing a revised rule. 

Reproposal is Essential to a Workable Final Rule:

Given the scope of the needed changes, and given the significant harm that will 

result to our members and their employees through the increased cost and reduced 

availability of advice if any final rule is not substantially altered, we respectfully request 

that the Department issue a reproposed rule and solicit additional public comments 

before it proceeds to a final regulation. Reproposal is necessary because the solutions 

to the complex issues discussed in the hearing testimony and written comments are 
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not simple and clear cut, but rather require careful attention to dozens of technical 

issues. The Department’s understanding of the effect of its decisions must be 

informed by the realities facing plans, participants, IRA owners and advice providers 

who must comply with any final rule. This cannot be done properly in a regulatory 

vacuum. 

It is clear that the Department did not coordinate closely enough with other 

financial regulators like the Securities and Exchange Commission (the “SEC”) and the 

Financial Industry Regulatory Authority (“FINRA”) in developing the Proposal given 

the outright conflicts with securities law and regulation that compliance with the 

Proposal could cause for some advisors. This is not a minor concern, but a major 

problem for the entire regulated community. While the effect of the Proposal might 

be to “supersede” the current standards imposed by the SEC, FINRA, and other 

Federal and State regulators, the reality is that the Proposal would simultaneously 

apply with the already extensive regulation of financial advisors and product sellers of 

various types. Advisors and others would be responsible both for compliance with 

the full scope of their current standards and with the Proposal’s additional 

requirements. The regulated community is whipsawed in the middle when these 

requirements conflict (as they would under the Proposal), or require onerous, but 

different, compliance regimes (as they would under the Proposal). We are especially 

concerned by the detailed comments submitted by FINRA identifying a large number 

of conflicts and errors in the Proposal. Accordingly, we request that the Department 

seek additional public input from the SEC, and publicly address each of the concerns 

raised by FINRA prior to any final rule.

The different interpretations of the Proposal’s language by several entities in 

their testimonies and comments clearly demonstrate that what may seem like 

straightforward regulatory text to the Department is anything but for those who must 

comply. A consistent theme among the hearing witnesses was uncertainty regarding 

the Department’s intentions and the meaning of ambiguous regulatory text. Many 

witnesses representing a broad spectrum of interests specifically discussed concerns 

about such ambiguities, including representatives of plan sponsors, the financial 

services industry and consumer advocacy groups. In fact, proponents of the rule also 
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acknowledged these concerns in their testimony. For example, Ms. Barbara Roper, 

Direct of Investor Protection for the Consumer Federation of America agreed with 

Mr. David Blass, general counsel of the Investment Company Institute, that “...the 

definition of investment advice needs to be revisited for the “directed to” element and 

[for] some ambiguous terms, including the “understanding” element.”

3

 

The response from Department officials during the hearings at times suggested 

that they perceived no ambiguities, or that they were dismissive of the underlying 

concerns regarding those ambiguities. This disconnect between the regulated and the 

regulator is exactly why reproposal is necessary, and why a second round of 

comments is essential. 

The Proposal is one of the most complex regulations the Department has 

attempted since ERISA’s passage. As the comments and testimony so starkly 

highlighted, the Department’s nearly four years of effort behind closed doors did not 

result in a “workable” rule. In fact, portions of the Proposal even exceed the 

Department’s legal authority. Specifically, the Department has no regulatory authority 

to create alternative legal remedies to ERISA’s exclusive remedies for participants, or 

to impose an ERISA fiduciary standard on advice to IRA owners, though it attempts 

to do both through BICE. The Department itself has conceded that changes must be 

made, and appeared to be exploring at least some of those changes through the 

hearings. However, we do not believe it is possible for the Department to fix the 

many policy and technical problems without additional input from the regulated 

community. Going directly to a final rule via another closed-door process in which 

the Department considers comments without additional input will simply result in 

more errors and mistakes. We do not make this request for the sake of delay—we 

make it for the sake of a final rule that will actually serve, rather than harm, the 

interests of our members and their employees.

 

3 Raw transcript of testimony presented on August 10, 2015, at 155, accessed on September 17, 2015 at 

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript1.pdf. 
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Employee Benefits Security Administration 

U.S. Department of Labor

September 24, 2015

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Prejudging “Legitimate” Concerns:

While the Department says its intent is to have an open regulatory process 

based on the free exchange of ideas, we are concerned by comments made by 

Department officials during the hearing that some of the objections to the ambiguities 

and restrictions of the proposal were “legitimate” while others were merely “talking 

points” against the rule. One such example was an exchange between Bradford 

Campbell, outside ERISA counsel to the U.S. Chamber, and Deputy Assistant 

Secretary Timothy Hauser, the highest-ranking career civil servant at the Employee 

Benefits Security Administration:

Campbell: “...[W]e have to adhere to these regulations by the letter. So where there 

is ambiguity, that's potential legal liability. It's a potential inability to 

know what the actual compliance obligation is.”

Hauser: “And, you know, obviously there are both ambiguities that I think are

legitimately identified that need to be clarified. There are ambiguities, to 

be completely blunt about it, that are talking points to be used in 

advocacy efforts to defeat the rule.”

4

Later, in discussing the effect of the Proposal on participant education with 

Lynn Dudley, Senior Vice President, Global Retirement and Compensation Policy for 

the American Benefits Council, Deputy Assistant Secretary Hauser suggested that 

employer concerns about the Proposal were being swayed by “talking points:”

Dudley: You need to rephrase or reframe some of what you're doing around

education...when I go around and I really have talked to lots of plan 

sponsors...they have the sense that you're telling them to pull back.

 

4 Raw transcript of testimony presented on August 11, 2015, at 628, accessed on September 17, 2015 at 

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript2.pdf.
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Employee Benefits Security Administration 

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Hauser: Well, do you think they might be influenced at all by those talking points 

that say casual conversations are treated as fiduciary? Because I think 

they might be.

Dudley: Well, I don't actually have talking points out on this because I really 

haven't done that, but I don't think that they're influenced. They’re not 

a membership that lets me tell them. They're a clear membership that 

tells me, and I am very aware of my role as the recipient of information.5

Specifically, we are concerned that these exchanges suggest the Department 

may have prejudged the outcome of the comments and the hearing, having already 

determined which concerns are not “legitimate”—those with which the Department 

disagrees. 

The point of the notice and comment process is to provide the Department 

with information and understanding of how its Proposal would work, or not work, in 

the real world. For example, concerns about litigation risk resulting from unclear 

drafting of regulatory requirements are not “talking points” but a real risk facing plans 

and advisors in complying with new legal obligations and conditions. A quick glance 

at the comments shows that a wide array of concerns has been expressed by a wide 

range of parties, with many noting similar problems. These common concerns should 

be a warning to the Department that the scope and impact of the proposed rule is 

broader than it may realize, and will have significant, far-reaching effects beyond the 

first tier compliance issues we have identified in the few months we have had to 

review the Proposal. Reproposing a revised rule for additional comment will ensure 

the Department has not continued to overlook, misunderstand or dismiss the 

concerns of the regulated community and bring us closer to a rule that may work in 

practice. 

 

5 Raw transcript of testimony presented on August 13, 2015, at 1146-1147, accessed on September 17, 2015 at 

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript4.pdf.
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Employee Benefits Security Administration 

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The Proposal Presents a Significantly Increased Risk of Class Action 

Litigation that Will Not Serve Participants’ or IRA Owners’ Best Interests

As we testified, we believe the BICE provisions creating a state law cause of 

action for breach of contract as an alternative to ERISA’s exclusive remedies are 

beyond the Department’s authority. What’s more, we believe the requirement that 

class action litigation be available under the contract will result in a great deal of new 

litigation, as the representations and warranties required by BICE are subjective 

standards that permit different compliance interpretations. These subjective 

standards permit the plaintiff’s bar to litigate the advisor’s reasonable and good faith 

interpretation of multiple points, creating a significant legal liability risk for advisors 

and their affiliated financial institutions. 

As we explain more fully in our July 20th, 2015 comment letter from the U.S. 

Chamber of Commerce and the U.S. Chamber’s Institute for Legal Reform, we do 

not believe the Department has the authority under Federal law to ban a binding 

arbitration provision in a BICE contract. The Federal policy favoring arbitration

under the Federal Arbitration Act (the “FAA”) is so strong that a “clear congressional 

command” is necessary to displace the FAA “even when the claims at issue are federal 

statutory claims.”6 When federal law is “silent” as to whether Congress intended to 

override the FAA for a particular type of claim, “the FAA requires the arbitration 

agreement to be enforced according to its terms,” regardless of whether the source of 

the claim is federal or state law.7 Nothing in ERISA or the Internal Revenue Code 

supplies the necessary clear command – indeed, nothing in either statute indicates any 

intent whatsoever to limit the availability of arbitration. The FAA therefore applies 

with full force.8 Because “[i]t is a fundamental precept of administrative law that an 

 

6 CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012).

7

Id. at 673.

8 Indeed, a number of federal courts have held that Congress did not intend in ERISA to preclude arbitration of

fiduciary breach claims. See, e.g., Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116, 119-20 (2d Cir. 1991);

Pritzker v. Merrill Lynch Pierce Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993); Kramer v. Smith Barney, 80 F.3d 1080 (5th

Cir. 1996); Simon v. Pfizer, Inc., 398 F.3d 765, 774 (6th Cir. 2005); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, 847 F.2d 
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Employee Benefits Security Administration 

U.S. Department of Labor

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agency action, rule, or regulation ‘cannot overcome the plain text enacted by 

Congress,’”9the Department cannot, without express statutory authority, prohibit 

what the FAA protects.

Further, class action litigation is not an effective or efficient means to protect 

the interests of the participants and IRA owners. Arbitration is at least as likely, and 

often more likely, than litigation in court to result in positive outcomes for 

consumers, as empirical studies repeatedly have shown. In addition, arbitration 

agreements offer fair and simplified procedures for consumers—something that is 

ensured by the protections of generally applicable state unconscionability law as well 

as the due process safeguards of the nation’s leading arbitration providers. 

From those arguing against arbitration, the Department has received comments 

suggesting that class action litigation concerns are overblown. The truth is quite the 

opposite—the litigation concerns presented by BICE are very real, and a significant 

barrier to its use unless materially changed. As Justice Ruth Bader Ginsburg noted in 

a class action case a few years ago, “A court’s decision to certify a class accordingly 

places pressure on the defendant to settle even unmeritorious claims.”

10

 Empirical 

analysis of recent class action litigation shows that the members of the class—here the 

participants and IRA owners—typically receive little or no benefit from settlements 

while the lawyers pursing their cases earn millions of dollars. The combination of the 

class action and the contingent fee, in which lawyers may reap 40% or more of the 

total settlement, incents litigation over tiny disputes. The BICE contract would be 

fertile ground for those with such incentives, as the subjective nature of the BICE 

contract warranties and representations would make good faith compliance 

determinations subject to legal second-guessing. 

 

475 (8th Cir. 1988); Williams v. Imhoff, 203 F.3d 758 (10th Cir. 2000); but see Amaro v. Continental Can, 724 F.2d 747 (9th 

Cir. 1988).

9 Sierra Club, Inc. v. Sandy Creek Energy Associates, L.P., 627 F.3d 134, 141 (5th Cir. 2010).

10 Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 445 n.3 (2010) (Ginsburg, J., dissenting).
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Employee Benefits Security Administration 

U.S. Department of Labor

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A recent empirical study by Mayer Brown LLP of 148 class action cases 

brought in 2009 and tracked through September 2013 (by which time 127 were 

resolved) found that:

o “The vast majority of cases produced no benefits to most members of the 

putative class—even though in a number of those cases the lawyers who 

sought to represent the class often enriched themselves in the process,”

o 35% were dismissed voluntarily by the plaintiffs, with most resulting in an 

undisclosed settlement for the lead plaintiff and attorneys, but nothing for 

the class members.

o “For those cases that do settle, there is often little or no benefit for class 

members, [and] few class members ever even see those paltry benefits—

particularly in consumer class actions...Of six cases in our data set for 

which settlement distribution data was public, five delivered funds to only 

miniscule percentages of the class: 0.000006%, 0.33%, 1.5%, 9.66%, and 

12%. Those results are consistent with other available information about 

settlement distribution in consumer class.”11

The Department should eliminate the class action requirement in BICE not 

only to reduce meritless litigation, but to actually protect the interests of the 

participants and IRA owners who are better served by arbitration.

Governmental as well as Private Entities Expressed Serious Concerns About 

the Proposal’s Impact on Small Businesses and Individuals 

 

11 “Do Class Actions Benefit Class Members? An Empirical Analysis of Class Actions” by Mayer Brown LLP, 

December 2013, accessed on September 17, 2015 at 

https://www.mayerbrown.com/files/uploads/Documents/PDFs/2013/December/DoClassActionsBenefitClassMe

mbers.pdf
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Employee Benefits Security Administration 

U.S. Department of Labor

September 24, 2015

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As we testified, the Chamber is the world’s largest business organization, 

representing the interests of more than 3 million businesses of all sizes, sectors, and 

regions, the overwhelming majority of which are small businesses. As plan sponsors 

and plan fiduciaries, our members are the recipients of investment advice, and they 

and their employees are the people this rule is intended to help. Their view is that the 

Proposal would not help them, but would hurt them. The Chamber and other groups 

representing businesses are not alone in criticizing the Proposal’s effects in reducing 

choices and increasing costs. 

Specifically, we direct the Department’s attention to the concerns of the Small 

Business Administration’s (“SBA”) Office of Advocacy. This fellow Federal agency 

filed a comment letter with the Department expressing serious criticism of the 

Department’s deficient economic analysis, particularly the projected impact on small 

business. The SBA focused in part on the difference in treatment between small and 

large plans under the large plan carve-out, questioning whether the Department fully 

appreciates the impact on small businesses.

The SBA Office of Advocacy wrote that it had conducted its own focus groups 

discussing the Proposal with small businesses, and the results of those focus groups 

showed that their position was the same as the Chamber members—these small 

businesses believed the proposal would make advice more expensive and less 

available.12

Similarly, the majority of the Senate Finance Committee Democrats wrote the 

Department about the importance of providing a broad seller’s carve-out covering 

small plans, writing, “The reality is that retirement plans for small businesses are sold, 

not bought—and it is important that any final rule take this factor into account.”13 

 

12 See, Comment letter from the Small Business Administration’s Office of Advocacy, July 17, 2015, at 5-6. (SBA’s 

multiple roundtable discussions and ongoing communications with small business stakeholders revealed that “the 

proposed rule would likely increase the [advisers’] costs and burdens associated with serving smaller plans...[and] 

could limit financial advisers’ ability to offer savings and investment advice to clients...ultimately lead[ing] advisors to 

stop providing retirement services to small businesses.”)

13 See, Comment letter from Senate Finance Committee members Sens. Wyden, Stabenow, Menendez, Carper, Cardin, 

Bennet, Casey, and Warner; August 7, 2015 at 3.
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Employee Benefits Security Administration 

U.S. Department of Labor

September 24, 2015

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“Best Interest” is Not a Synonym for the ERISA Fiduciary Standard and the 

Associated Prohibited Transaction Rules...Which Can Act Against Your 

Best Interest.

One of the major issues coming from the hearings and comments is that acting 

in a person’s “best interest” is not the same thing as the Proposal’s imposition of the 

ERISA fiduciary standard and its associated prohibited transaction restrictions. The 

Chamber supports financial advisors acting in the best interest of their clients—our 

members are their clients. What we don’t support is relabeling the ERISA fiduciary 

standard along with all of the prohibited transactions rules as “best interest” when the 

simple fact is that the ERISA fiduciary standard and the prohibited transaction rules 

in fact can prevent our members’ advisors from acting in our members’ best interest. 

Thus, while the Department uses the term “best interest” to describe what the 

Proposal requires, the actual requirements of the Proposal are not about best interest, 

but about the application of the prohibited transaction rules. The prohibited 

transaction rules apply without regard to the “best interest” of the recipient of advice, 

as they are based on the relationships between the advisor and the investments, not 

on the content of the advice. A small business or an IRA owner could seek and 

receive what is without any doubt the best possible advice that is entirely in his or her 

best interest, and yet the Proposal could—and would—still declare that advice to be 

prohibited. The Proposal itself illustrates this point through the large plan carve-out. 

The Proposal would permit a large plan with more than 100 participants or 

$100 million in assets the choice to continue to receive advice not subject to the new 

fiduciary definition. This choice is denied to small plans, participants and IRA 

owners. The practical effect of this is that large plans may determine for themselves 

when the new rules act against their best interest by limiting the information they can 

receive, and they may access that information from advisors who are not allowed to 

provide it to small plans or individuals. Allowing large plans, without prohibition, 

access to advice that is denied to small plans and IRA owners not only implicitly 

acknowledges that this advice must serve large plans’ “best interest” (for if it did not, 

the Department would have prohibited it for large plans also) but proves the point
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Employee Benefits Security Administration 

U.S. Department of Labor

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that a small business or IRA owner’s “best interest” is not determined by ERISA’s 

arguably arbitrary prohibited transaction rules, and may actually be harmed by them. 

That is why we believe that the large plan carve out should be modified into a 

sellers’ carve out available to interactions with all plans and all IRA owners, not just to 

large plans. This is what the Department originally proposed in 2010. With clear 

disclosure of the type contemplated by the Proposal for large plans to ensure there is 

no confusion of advice for sales activity, small plans and IRA owners will benefit 

from choice and availability of advice, just as large plans will. Department officials 

asked a number of questions about this distinction between advice and sales over the 

course of the hearings, which we address in more detail below.

A broad seller’s exemption is one important change needed to address the 

problems resulting from conflating “best interest” with the ERISA fiduciary standard 

and associated prohibited transaction rules, but other changes would also be necessary 

to fully address this problem. For example, BICE does not clearly permit traditional 

compensation methods for insurance and annuity contracts—the “conflict” results 

from the application of the prohibited transaction rules to issues like the timing of the 

commission payments or the agent’s representation of a proprietary product, not from 

whether the recommendation is actually in the client’s best interest. There are many 

other examples we have identified in our comment letters and testimony, all of which 

are practical problems directly resulting from the Department’s decision to use the 

prohibited transaction rules in ERISA and the Code as a proxy for the “best interest” 

of plans, participants and IRA owners.

Additional Comments on Specific Issues Raised During the Hearings

In our comments and testimony, we expressed many concerns and made a 

number of specific recommendations to add or remove language to address these 

issues. Some of these were discussed during the hearings by Department officials, 

and we wish to follow up on these issues to more clearly express our views.
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Employee Benefits Security Administration 

U.S. Department of Labor

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A Broad Sellers’ Carve-Out for all Plans and IRAs:

As discussed above and in our comment letter and testimony, the Department 

should retain the broad sellers’ carve-out it originally proposed in 2010. During the 

hearings, Department officials asked a number of witnesses why such a carve-out is 

necessary, appearing to suggest that sales activity could or should be compatible with 

the ERISA fiduciary standard and the associated prohibited transaction rules. The 

Department officials asking these questions appeared to believe that objecting to the 

Proposal’s requirements was tantamount to a rejection of acting in the best interest of 

the client. Nothing could be farther from the truth. 

There are a number of ways a regulation could define best interest. 

Unfortunately, as these questions from Department officials show, the Department 

seems to believe that acting in the “best interest” of the advice recipient can only 

mean complying with the ERISA fiduciary standard and the prohibited transaction 

rules. We disagree, as the two standards simply are not the same—the prohibited 

transaction rules go far beyond best interest, and can actually act against the best 

interest of the advice recipient. As discussed above, an advisor can make a 

recommendation that is in your best interest, but nonetheless be prohibited from 

doing so under the Proposal. That is why sales discussions are not compatible with 

the ERISA fiduciary standard and prohibited transaction rules, and require a broad 

sellers’ carve out.

Seller’s Carve-Out is Necessary for Proprietary Products Due to Prohibited Transaction Rules:

Another illustration of this conflict between what is actually in the best 

interest of a client and what the Proposal would require is the treatment of proprietary 

products. An insurance agent, for example, may be prohibited from discussing 

proprietary products even when doing so is in the recipient’s best interest. As the 

Chamber testified during the hearings, a broad seller’s carve-out is necessary for a 

variety of reasons, such as ensuring that small plans and individuals are not 

discriminated against by depriving them of options available to large plans. In 

addition, with respect to proprietary products, the sellers’ carve-out is necessary 
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Employee Benefits Security Administration 

U.S. Department of Labor

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because the ERISA prohibited transaction rules do not permit advice, no matter how 

much such advice is in the best interest of the recipient, where there is a structural 

connection with the investments. This is a significant concern for the sellers of 

proprietary products. If the seller represents a specific provider of investment 

products, the Proposal deems that advice to be conflicted. As a result, an exemption 

from the prohibited transaction rules is necessary to permit the sales conversation, 

which the Proposal has redefined as “fiduciary advice.” BICE does not clearly cover 

such transactions as it requires advice to be provided “without regard to the financial 

or other interests of the Adviser, Financial Institution or any Affiliate, Related Entity, 

or other party.”

14

 This is a nearly impossible standard to meet when the agent can 

only discuss investments or products offered by affiliated entities. 

Transition Rules, Ongoing Arrangements and the Seller’s Carve-Out:

In our comment letter, we illustrated the difficulties presented by the 

Proposal’s very limited transition rule in several ways. There is no general transition 

rule, resulting in disruption of existing arrangements. BICE permits preexisting 

arrangements to continue only to the extent that the account assets are on the 

approved list, and only if no additional advice is provided. Among other concerns, 

we noted that in the case of an up-front fee paid for additional investment 

information in the future, the lack of a transition rule would deny that investor the 

benefit of the arrangement he or she had negotiated. 

During the hearings, Department officials inquired about such up-front 

payment for future services, specifically asking if this arrangement would be covered 

by the sellers’ carve-out. If this information is advice, the Department asked, should 

it be covered by an exemption for sales? As discussed above, the question conflates 

acting in the “best interest” with ERISA fiduciary status and compliance with the 

prohibited transaction rules. Sales activity, including ongoing sales activity, generally 

cannot comply with the ERISA fiduciary standard—the prohibited transaction rules 

do not permit the structural relationship between the seller and its proprietary 

 

14 80 Fed. Reg. 21,986 (Apr. 20, 2015)
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Employee Benefits Security Administration 

U.S. Department of Labor

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products, whether the sales discussion occurs only at the beginning of the relationship 

or over multiple interactions during the life of the arrangement. 

Further, the sales activity associated with the investment may not begin and 

end with the initial agreement in many types of products—there is ongoing sales 

activity that must be covered by the sellers’ carve-out. Ongoing sales activity cannot 

be recast as prohibited advice because it is provided after the point of the initial sale. 

To do so would simply not work in practice. For example, defining sales activity to 

occur only at the initial point of contact would mean than an insurance agent could be 

prohibited from answering a client’s future questions about the product she sold, such 

as the effect of exercising a right or feature under the policy that could be construed 

as a recommendation. Under this odd result, the agent would not be a fiduciary for 

the initial sale of the product, but would become a fiduciary, and therefore be

prohibited from helping the client, after the initial paperwork was signed. This 

outcome would not be in the best interest of the participant or IRA owner, who 

would effectively be deprived of future interaction with the agent with whom her or 

she chose to work. 

 

Therefore, we request that the Department make clear that the sellers’ 

exemption is not limited to the initiation of an arrangement, but covers sales activity 

provided at any point in the relationship. 

Retaining IB 96-1’s language on Asset Allocation Models and Representative Investment Options: 

In our comment letter and in our testimony, we objected to the limitations in 

the Proposal’s education carve-out that redesignated asset allocation models 

identifying available investments as fiduciary advice. In our view, along with that of 

many other commenters, removing this important feature of the current Interpretive 

Bulletin 96-1 (“IB 96-1”) undermines the purpose of education. Participants and IRA 

owners will find little utility in an asset allocation model that does not help them 

understand which investments belong to which asset classes. For nearly 20 years such 

models and accompanying investment option information have been an essential part 
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of participant education efforts, and the Department cited no evidence of abuse or 

other material concerns to justify such a drastic change.

During the course of the hearings, Department officials asked a number of 

witnesses for their views on a variation of IB 96-1 in which the model asset 

allocations could be provided along with available investments so long as all of the 

available investments in each asset class were listed. As we testified, such a limitation 

on education could work in the narrow circumstances of a plan with a fairly small 

number of available investments. 

However, this alternative does not realistically address the very real need for 

education on an IRA platform, where the number of investment options could be 

quite large. It is not feasible to provide a list of the hundreds of mutual funds or 

other investments within each asset class that are likely to be available to an IRA 

owner. Indeed, even if such a list were required, it is unlikely that most IRA owners

would look beyond the first few options listed. IRA owners need access to education, 

including model asset allocations, just as much as plan participants with a limited 

investment menu, and the provisions of IB 96-1 are well-designed to help them get 

this needed education. 

IB 96-1 allows a number of representative investments in each asset class to be 

provided, along with notice that additional investments are available. This is a 

superior solution, as it is practical in scenarios with many investment options, and has 

proven to work well in current plans. Accordingly, we request that the current 

language of IB 96-1 be included in the education carve-out in any final rule, and that 

this language apply to IRA owners as well as to plan participants.

BICE Limitations on Listed Assets:

As we testified and commented, the BICE restriction of a defined list of assets 

is both wrong as a matter of policy, and impractical in execution. The list of assets 

offers no additional protection against “conflicts”—instead it merely prevents 
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advisors that need the exemption under BICE from advising on non-listed assets, no 

matter how much doing so would be in the best interest of the recipient. 

During the hearing, a Department official asked about our objection to the 

asset list, and why we believe it “prevented” advisors from advising on assets not on 

the list. The official’s view was that BICE did not prevent the advice—it simply did 

not provide an exemption for it.15 As we testified, that is essentially the same result. 

If an advisor needs to use BICE, as we believe many will for rollovers and other 

activities, then he or she cannot discuss investments not on the list, no matter how 

beneficial they may be for the advice recipient.

An example of this concern is managed accounts. Managed accounts, or other 

forms of discretionary management, are not eligible for BICE. In a situation where 

BICE is needed—for example, a rollover—the advisor cannot discuss managed 

account options in connection with the rollover because BICE does not apply. Thus, 

a participant wanting a professionally managed account (for example, a participant 

who used such an account in his or her 401(k) and would like to do so in an IRA as 

well) would be unable to receive any assistance from his or her advisor. Similarly, a 

participant seeking advice from a “BICE” advisor regarding current plan investment 

options would be unable to get advice regarding the plan’s discretionary management 

investment option, despite this being a designated investment option selected by the 

plan fiduciary for use by plan participants. These outcomes do not make sense, but 

they are the logical result of BICE as proposed.

BICE Remedy and Conduct Requirements Exceed the Department’s Regulatory Authority:

As we testified, we believe the Department has attempted to impose conditions 

in BICE that it lacks the authority to require. Specifically, the Department has no 

regulatory authority to create alternative legal remedies to ERISA’s exclusive remedies 

for participants. Yet this is exactly what BICE attempts to do by creating new, state 

 

15 Raw transcript of testimony presented on August 11, 2015, at 638, accessed on September 17, 2015 at 

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript2.pdf.
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law-based class action lawsuits for participants claiming breach of contract. Similarly, 

the Department has no legal authority to mandate compliance with ERISA’s fiduciary 

provisions on advisors to IRAs—Congress expressly excluded IRAs from ERISA’s 

fiduciary requirements. Yet again, this is exactly what BICE attempts to do by 

requiring an advisor to an IRA owner to contractually agree to adhere to an “Impartial 

Conduct” standard that is essentially just a slightly reworded version of the ERISA 

Sec. 404(a) fiduciary standard. 

We do not believe the Department can require exemptive conditions it lacks 

the authority to impose directly—this is beyond the scope of the authority granted by 

Sec. 408(a) of ERISA. Accordingly, we request that the Department remove the new 

private right of action created in BICE entirely. 

Concerns Regarding Rollovers:

One of the most significant changes in the Proposal is making a 

recommendation regarding the advisability of a rollover or other distribution fiduciary 

advice. This has created significant ambiguities that the Department has not 

addressed. First and foremost, the Department has not indicated under what 

circumstances advice to take a distribution or rollover would be a prohibited 

transaction. This is a crucial issue, as it goes both to the scope of the fiduciary duty 

regarding the rollover recommendation and the relationships between the parties that 

give rise to a prohibited transaction. Second, BICE is not written in a manner that 

clearly covers rollover advice. While it may have been intended to do so, the 

regulatory text is not explicit. Both of these issues must be clarified in any final rule if 

the Department is to avoid disrupting important rollover activity. We also ask that 

the Department expressly clarify that discussing rollover and distribution options, 

unless accompanied by a recommendation, is education, and not fiduciary advice. 

While this seems a clear inference to draw, it would be preferable to have it expressly 

stated in the regulatory text or in the Preamble to the Proposal. As most plans do not 

offer individual investment advice (due in part to the prohibited transactions rules the 

Department proposed to apply even more broadly in the Proposal—a result the 

Department calculated in 2011 cost participants more than $100 billion per year in 
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preventable investment errors),

16 rollovers are one of the few ways participants can 

access products and services needed to plan the “spending” phase of their 

retirements.

Concerns Regarding the Platform Provider Carve-Out:

Though we briefly alluded in our testimony to efforts by platform providers to 

offer services designed to meet the needs of different kinds of plans, such as those 

plans that might not be able to find an advisor due to the Proposal’s increased costs 

and legal liabilities, the limited time available during the hearing did not allow us to 

discuss this in detail. The platform provider carve-out in the Proposal is an important 

concept, but it needs to be modified and more clearly written.

First, it needs to be clear that the platform provider carve out applies to IRA 

and annuity platforms. Second, it needs to be clear that platform providers can offer 

plans pre-bundled packages of services with limited investment menus and other 

features without becoming fiduciaries.

Finally, as we testified in the hearing, the language in the carve-out that 

prevents the platform provider from taking into account the individualized needs of 

the plan must be removed. Plan sponsors need platform providers to provide 

individualized responses to their requests for proposal (“RFP”) in order for our 

members to comply with their own fiduciary duty to prudently select and monitor 

service providers.

 

16 See, The Preamble to the final regulation implementing the Pension Protection Act investment advice provisions, 76 

FR 66,151-66,153 (October 25, 2011) (...the retirement income security of America's workers increasingly depends on 

their investment decisions. Unfortunately, there is evidence that many participants of these retirement accounts often 

make costly investment errors due to flawed information or reasoning...Financial losses (including foregone earnings) 

from such mistakes likely amounted to more than $114 billion in 2010...Such mistakes and consequent losses 

historically can be attributed at least in part to provisions of the Employee Retirement Income Security Act of 1974 

that effectively preclude a variety of arrangements whereby financial professionals might otherwise provide retirement 

plan participants with expert investment advice.) [Emphasis added].
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Accordingly, we request that the Department make the changes discussed 

above in any final rule, as limiting the ability of platform providers to meet the needs 

of plans and IRAs will not be in the best interests of plan, participants, or IRA 

owners. 

Disclosure Requirements Must Be Modified:

Two key considerations in any disclosure regime should be whether disclosures

are effective and efficient. The BICE disclosure requirements fail on both counts. 

Compared to generalized disclosures, the very specific, individualized, prospective and 

retrospective disclosures required by BICE would be extremely expensive to prepare

(a cost ultimately borne by the participant or IRA owner), and offer very little, if any, 

additional utility to plans, participants and IRA owners justifying the much higher 

fees. The same information facilitating an understanding of the effect of fees could 

be conveyed with greater simplicity, greater efficacy, and at much less expense using 

general rather than individualized disclosures. 

For example, an illustration of the effect of fees over time would be easier to 

understand and cheaper to provide than an individualized 1, 5 and 10 year speculative 

projection of the future costs of a particular investment, especially where making the 

projection might itself conflict securities laws.

Comments Related to Other Testimony:

In addition to the issues addressed above, the Chamber would like to address 

certain issues related to testimony presented by other witnesses. 

For example, Mr. Stephen Hall, the witness representing Better Markets,

testified that the Department’s Proposal was “not stretching boundaries” but was 
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simply doing “what Congress actually said and always intended.”17 This directly 

misstates the law with respect to IRAs.

Congress never intended the ERISA fiduciary standard to apply to advice 

provided to IRA owners. In passing ERISA and creating IRAs, Congress established 

the ERISA fiduciary standard for employee benefit plans subject to Title IV of 

ERISA, but expressly excluded IRAs from that fiduciary standard. As we commented 

and testified, we do not believe DOL has the legal authority to circumvent this 

Congressional decision by imposing an ERISA fiduciary standard as a condition of an 

exemption, when it could not do so directly. 

We also note that a number of witnesses who spoke in support of a fiduciary 

standard in general terms did not fully explain how that general standard differs from 

the Proposal. For example, witnesses representing Certified Financial Planners

(“CFP”) suggested that as they already adhere to a CFP fiduciary s2tandard, 

compliance burdens under the Proposal would be minimal because the CFP 

requirements are “similar” to the BICE requirements.18 While elements like a written 

contract are similar, it is worth noting that the CFP fiduciary standards permit the 

disclosure of conflicts, but do not require levelized compensation for broker-dealers, 

registered representatives or insurance agents. They do, however, require the advisor 

to act in the best interest of the client. This is exactly the issue we address above—a 

best interest standard, such as that espoused by the CFP Board standards, is not the 

same as compliance with the ERISA fiduciary requirements and the associated 

prohibited transaction rules. 

 

17 Raw transcript of testimony presented on August 11, 2015, at 595 and 596, accessed on September 17, 2015 at

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript2.pdf.

18 Raw transcript of testimony presented on August 10, 2015, at 29, accessed on September 17, 2015 at 

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript1.pdf. 
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Conclusion:

We look forward to working with the Department to discuss these and other 

issues regarding the Proposal. We want to ensure that financial advice is in the best 

interests of our members and their employees, but the Proposal needs significant 

modification in order to meet that standard. We ask that these modifications be 

achieved through reproposal and additional public comments. This request is not 

about delaying the regulation, but about ensuring that a final regulation benefits the 

plans, participants and IRA owners who have the most to lose from a rule that 

unnecessarily limits access and choice in retirement savings advice.

Sincerely,

David Hirschmann Randel Johnson