DCIIA Public Policy 

ERISA Fiduciary Definition 

February 3, 2011 

Submitted Electronically

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW. 

Washington, DC 20210 

Attention: Definition of Fiduciary Proposed Rule 

RE: EBSA Proposed Rules: Definition of the Term “Fiduciary” (Published on 

October 22, 2010)

DCIIA supports the goal of the Employee Benefits Security Administration (EBSA) to protect 

defined contribution plan (DC plan) participants and beneficiaries through regulatory oversight 

and initiatives. DCIIA has reviewed EBSA’s proposed rule changes to the term fiduciary, as 

defined under Section 3(21) of the Employee Retirement Income Security Act of 1974, as 

amended (“ERISA”). We acknowledge that the issues are complex and understand DC plans 

and plan sponsors could in certain cases benefit from a clearer understanding of when plan 

service providers are acting as fiduciaries. However, we are concerned that the proposed rule 

changes, if finalized as proposed, could significantly harm DC plans and participants. 

DCIIA is pleased to respectfully submit the following comments to the proposed rule to assist 

EBSA in this effort. 

Summary of Comments and Recommendations:

In summary, EBSA’s proposed rule would make fundamental changes to a long-standing, 

important regulation that was carefully considered at the time it was finalized in 1975 (shortly 

after the enactment of ERISA). We ask that before EBSA makes significant changes to 

fundamental provisions of existing law, EBSA carefully consider the many ways in which the 

proposed rules could impact existing business relationships and ensure there are no adverse 

unintended consequences to DC plans or rule changes that would stifle innovation and the 

pursuit of progress. As President Obama’s Executive Order 12866 notes: “Each agency shall 

identify and consider regulatory approaches that reduce burdens and maintain flexibility and 

freedom of choice for the public.” 

If maintaining flexibility and freedom of choice are key considerations, we fear that the proposed 

rules, if adopted, could prevent DC plans and participants from having the ability to access 

certain services and reduce the number and quality of service providers available. We also 

question to what extent the changes would create additional administrative burdens and costs 

or result in an increase in fees charged to DC plans and participants for existing services. The 

proposed rules would require service providers to modify products, services, licensing, training 

programs, insurance coverage, marketing materials and service agreements, among other 
February 3, 2011 

Page 2 

things. The cost of these changes would ultimately be borne by plans and participants, as well 

as by the financial service providers, of which well over half are small businesses.1

We also urge EBSA to coordinate its proposed rules with initiatives currently underway with the 

Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission 

(CFTC). Understanding the important role that plan fiduciaries and service providers play in 

creating successful retirement outcomes, the rulemaking being undertaken by regulators with 

overlapping jurisdiction should be consistent and not create confusion. We noted in our 

comment letters to the SEC’s recent proposed target date fund rule (Investment Company 

Advertising: Target Date Retirement Fund Names and Marketing)2

 and EBSA proposed target 

date fund disclosure rule,3

 inconsistent regulation can lead to poor outcomes. 

As a result, we respectfully request that EBSA consider withdrawing and, if necessary, reproposing rule changes once it has conducted a more comprehensive review, including by 

reconsidering EBSA’s prior cost-benefit analysis, coordinating its efforts with other regulatory 

agencies involved in related rulemakings and addressing the comments received as a part of 

this process. 

At a minimum, if EBSA does not withdraw the current proposed rule, DCIIA requests that EBSA 

revise the proposed rule to: 

 Require that investment advice and recommendations be individualized to the needs of 

the plan in all cases. 

 Avoid making providers of generic advice and recommendations ERISA fiduciaries 

solely because they are fiduciaries or registered investment advisers to the plan on other 

matters. 

 Require that there be a reasonable expectation or mutual understanding that the advice 

or recommendations provided form a primary basis of, or at least be a significant factor 

in, plan investment or management decision making. 

 Focus the types of advice and recommendations covered by the proposed rule to 

include only investment advice and not other types of advice or recommendations that 

do not constitute investment advice by including all of the exceptions from the definition 

of investment adviser under the Investment Advisers Act of 1940. 

 Limit the changes so as not to inappropriately characterize an affiliate’s advice, 

recommendations or activities as fiduciary advice when the affiliate is not providing 

investment advice or its activities are unrelated to or independent of any investment 

advice provided. 

 Strengthen the “counterparty exception” to cover similar or less adverse relationships 

that commonly arise in DC plan relationships so that the exception is not strictly limited 

to purchases and sales of securities or property. Clarify that the exception includes 

ongoing communications and modifications of transactions otherwise covered by the 

 

1 “Retirement Intermediaries 6”, Brightwork Partners LLC, 2010 2

 http://www.sec.gov/comments/s7-12-10/s71210-42.pdf 

3

 http://www.dol.gov/ebsa/pdf/1210-AB38-025.pdf 
February 3, 2011 

Page 3 

exception and that the seller’s non-fiduciary status can be established by disclosures of 

conflicts of interest or when the plan is represented by a QPAM or an INHAM. 

 Clarify that the “investment platform exception” covers other valuable services commonly 

provided by platform providers, such as assisting with narrowing available investment 

options, when such services are based on objective third-party criteria that does not 

constitute investment advice.

 Add an exception that would allow sophisticated parties to contractually or otherwise 

expressly agree that a provider of advice is not acting in a fiduciary capacity when the 

advice or recommendation is impartial (not conflicted) (i.e., the provider of the advice or 

recommendation is impartial and not conflicted as to the outcome of the plan’s decision). 

 Develop guidelines for providing meaningful financial assistance to retiring participants 

both inside and outside of the plan, while also protecting against undisclosed conflicts of 

interest. 

Lastly, DCIIA asks EBSA to provide transition relief for changes in business practices which 

would result from redefining the definition of fiduciary, including to obtain such exemptions as 

would be required to permit business practices that are in the best interests of DC plans and 

their participants and to promote successful retirement outcomes for ordinary Americans. As 

noted above, we urge EBSA to first withdraw and, as appropriate, re-propose rules prior to 

issuing a final regulation to allow for continued careful consideration by interested parties. In 

any case, applicability of any proposed rule changes should be no earlier than two years after 

the promulgation of any final regulation. 

Specific Comments:

A Comprehensive Cost-Benefit Analysis Must Be Conducted. 

DCIIA requests that EBSA review its cost-benefit analysis in connection with the proposed rule 

changes. As President Obama recently set forth in Executive Order 12866, regulatory agencies 

must “propose or adopt a regulation only upon a reasoned determination that its benefits justify 

its costs.”4

 We are concerned that the proposed rule redefining the term “fiduciary” does not 

fully take into account the costs associated with service providers to DC plans potentially having 

to restructure (or terminate) their relationships with their plan clients (and any associated fee 

increases that may result). 

As an example, the preamble to the proposed rule changes5

 provides: 

The Department assumes that affected service providers will require on 

average 16 hours of legal professional time at a cost of approximately $119 

per hour to perform the compliance review. 

DCIIA believes this assumption significantly underestimates the amount of time that will need to 

be expended to review and implement compliance with any changes to the definition of fiduciary 

by internal and external legal professionals, compliance personnel, affected business 

representatives and other personnel at DC plan sponsors, investment advisors and other 

 

4

 http://www.whitehouse.gov/the-press-office/2011/01/18/improving-regulation-and-regulatory-review-executive-order 5

 75 F.R. 204 at 65274. 
February 3, 2011 

Page 4 

intermediaries, platform providers, financial services institutions and other industry participants, 

and for review and coordination across affiliates of these affected parties. 

Proposed Changes Are Overbroad. 

As Proposed, Advice and Recommendations Not Required to Be Individualized or Even Used 

by the Plan. 

Paragraph (c)(1)(ii) of the proposed rule would make a person providing advice or 

recommendations a “covered person” if such person: 

either directly or indirectly (e.g., through or together with any affiliate) – 

(A) Represents or acknowledges that it is acting as a fiduciary within 

the meaning of [ERISA] with respect to providing advice or making 

recommendations . . . ; 

(B) Is a fiduciary with respect to the plan within the meaning of section 

3(21)(A)(i) or (iii) of [ERISA]; 

(C) Is an investment adviser within the meaning of the [Investment 

Advisers Act of 1940]; or 

(D) Provides advice or makes recommendation. . . pursuant to an 

agreement, arrangement or understanding, written or otherwise, 

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

participant or beneficiary, that such advice may be considered in 

connection with making investment or management decisions with 

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

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

The provisions of (A), (B), (C) and (D) of paragraph (c)(1)(ii) of the proposed rule establishing 

the categories of “covered persons” operate separately from one another. As a result, covered 

persons would not need to provide advice or recommendations that are individualized to the 

plan. What’s more, there is no need for any understanding that the advice or recommendation 

be considered by the plan. 

Specifically, under the proposed rule, the requirements in paragraph (c)(1)(ii)(D) that the advice 

or recommendation be provided “pursuant to an agreement, arrangement or 

understanding...that such advice may be considered in connection with making investment or 

management decisions” and “be individualized to the needs of the plan” need not be met if the 

person (or its affiliate) is (or represents or acknowledges that it is) a fiduciary or if such person 

(or its affiliate) is an investment adviser under the Investment Advisers Act of 1940. 

For example, an independent plan fiduciary may receive research reports, white papers on best 

practices or a general newsletter from a person that is (or whose affiliate is) a fiduciary to the 

plan or an investment adviser under the Investment Advisers Act of 1940. Yet, under the 

proposed rule providing these types of generic information, even if at no cost to the recipient, 

could cause the advice or recommendation to be considered ERISA fiduciary advice, even if 

such information is limited to general advice or recommendations which are not individualized to 

the needs of the plan and which may not even be used by the plan. 
February 3, 2011 

Page 5 

We do not believe this result is necessary or workable. EBSA itself acknowledged in its 

preamble6

 to the proposed rules in the case of investment advisers: 

the Investment Advisers Act imposes on investment advisers an affirmative 

duty to their clients of utmost good faith, full and fair disclosure of material 

facts, and an obligation to employ reasonable care to avoid misleading 

their clients. 

Furthermore, as expressed in President Obama’s Executive Order 12866, overlapping and 

inconsistent regulation is unnecessary, confusing and costly. 

Persons that serve as ERISA fiduciaries and investment advisers (and their affiliates) should not 

be discouraged from providing helpful information to plan fiduciaries, especially when 

independent plan fiduciaries understand the information is not investment advice and are not 

regarding it as such. A proposal that requires plans to consider the provision of generic 

information as fiduciary advice, even where there is no mutual understanding or agreement for 

that to be the case, limits the ability of plans and service providers to structure their relationships 

in a manner that is most helpful. 

DCIIA Recommendation:

Delete paragraphs (c)(1)(ii)(A), (B) and (C) of the proposed rule or at a minimum require that the 

advice or recommendation also be described in paragraph (c)(1)(ii)(D) (e.g., be individualized to 

the needs of the plan and be made pursuant to some type of reasonable agreement, 

arrangement or understanding that such advice or recommendation would be considered 

(taking into account the proposed modifications to paragraph (c)(1)(ii)(D) below)). 

Advice and Recommendations Should Actually Form a Primary Basis of (or Be a 

Significant Factor in) the Plan’s Investment or Management Decisions. 

The requirement in paragraph (c)(1)(ii)(D) of the proposed rule that the advice or 

recommendation be provided “pursuant to an agreement, arrangement or understanding” 

requires only “that such advice may be considered in connection with making investment or 

management decisions.” Also, the phrase “pursuant to an agreement, arrangement or 

understanding” omits any requirement that the arrangement or understanding be “mutual.” 

Taken together, this creates a low threshold which could result in persons inadvertently and 

unintentionally being treated as ERISA fiduciaries for advice or recommendations never 

intended to actually form a primary basis of, or be a significant factor in, the plan’s investment or 

management decisions. As an example, generic advice and recommendations included in 

general presentations and webinars, or even newsletters or published articles, could be deemed 

fiduciary advice. 

DCIIA requests that EBSA reconsider this provision and reinstate the “primary basis” standard 

or at least propose a reasonable standard requiring that the advice or recommendation be a 

significant factor in the plan fiduciary’s investment or management decisions with respect to 

plan assets. At the same time, unless any arrangement or understanding is required to be 

mutual, persons could unfairly be treated as fiduciaries. How can a person be expected to be a 

fiduciary if there is no reasonable expectation or mutual understanding that the advice would 

actually form a primary basis of, or be a significant factor in, the plan’s investment or 

 

6

 75 F.R. 204 at 65267. 
February 3, 2011 

Page 6 

management decisions? The person providing the advice may have no idea (or reasonable 

expectation) that the advice is intended to be fiduciary in nature and may not even have 

knowledge of the plan’s specific situation or circumstances. 

DCIIA Recommendation:

Revise paragraph (c)(1)(ii)(D) to reinstate the “primary basis” standard or at least require that 

the advice or recommendation be a significant factor in the plan fiduciary’s investment or 

management decisions with respect to plan assets. Add “mutual” before “arrangement or 

understanding.” 

Advice and Recommendations Covered Under the Proposal Do Not Have to Be 

Investment Advice. 

The proposed rule7

 generally applies to a covered person who: 

(1) Provides advice concerning the value of securities or other property, 

(2) Makes recommendations as to the advisability of investing in, 

purchasing, holding or selling securities or other property, or 

(3) Provides advice or makes recommendations as to the management 

of securities or other property. 

Notably, the proposed rule does not require that the advice provided or recommendations made 

be investment advice. For this reason, the proposed rule changes are broad enough to include 

as fiduciaries persons who provide advice incidental to the provision of investment advice, such 

as brokers, accountants and lawyers. For example, a lawyer drafting or otherwise providing 

recommendations on legal documentation for a client that is a plan fiduciary should not as a 

result also be deemed to be a plan fiduciary. These service providers may be forced to either 

increase fees or consider not providing these services to plans. Again, we do not believe this 

result would protect plans. 

As EBSA acknowledges in the preamble to the proposed rule, the Investment Advisers Act of 

1940 has specific exclusions from the definition of “investment advice”, such as for brokers, 

accountants, lawyers, publishers, teachers and others.8

DCIIA Recommendation 

Revise the proposed rule, through the use of cross references, to include all exceptions to the 

investment advice definition under the Investment Advisers Act of 1940 for each condition of the 

investment advice test, not just the condition relating to the provider’s status as an investment 

adviser under the Investment Advisers Act.9

 For example, these exceptions include (1) a 

lawyer, accountant, engineer or teacher whose performance of such services is solely incidental 

to the practice of his or her profession; (2) any broker or dealer whose performance of such 

services is solely incidental to the conduct of his business as a broker or dealer and who 

 

7

 See proposed §2510.3-21(c)(i). 

8

 75 F.R. 204 at 65266. 

9

 Investment Advisers Act of 1940 Section 202(a)(11), 15 U.S.C. 8b-2(a)(11). 
February 3, 2011 

Page 7 

receives compensation therefor; (3) the publisher of any bona fide newspaper, news magazine 

or business or financial publication of general and regulation circulation.10

Proposal Applies Fiduciary Status to Affiliates Irrespective of Their Activities. 

By including in paragraph (c)(1)(ii) of the proposed rule the clause: 

Such person directly or indirectly (e.g., through or together with any 

affiliate) 

the proposed rule change would also apply to any affiliate of a covered person that provides 

advice or make recommendations even if the affiliate has no involvement in such activities. This 

proposed change fails to appropriately acknowledge the broad range of products and services 

provided by financial services institutions and also the large number of affiliates providers may 

have. For example, many of these organizations cannot track relationships across business 

units and affiliates, such as when these affiliates operate as independent business operations or 

when information barriers have been established for legal regulatory compliance purposes. 

Operating in good faith based on long-standing EBSA regulations, many established business 

models that involve plans independently choosing to access one firm and/or its affiliates for a 

wide array of products and services could now be strictly prohibited and require additional 

administrative exemptions from EBSA to continue. This would be true even if such practices 

are otherwise determined by independent plan fiduciaries to be prudent and in the best interests 

of the plan and its participants and beneficiaries. 

Our concern is compounded by the fact that the proposed rules have removed the requirement 

that advice be individualized to the needs of the plan and that such advice be investment 

advice. For example, as noted above, the requirement that advice be individualized to the 

needs of the plan is now only found in paragraph (c)(1)(ii)(D) of the proposed rule and not 

required of advice or recommendations of fiduciaries and investment adviser. By removing the 

necessity that any advice be individualized to the needs of the plan, generic information 

provided by an affiliate of a fiduciary or investment adviser could be deemed fiduciary advice. If 

the fiduciary or investment adviser has an affiliated dealer, the plan would also be precluded 

from trading with that affiliated dealer, absent additional exemptions or exceptions being issued 

by EBSA. 

EBSA stated in the preamble to the proposed rule11 that the change to the fiduciary definition 

will result in efficiencies by allowing EBSA to more efficiently allocate its enforcement resources. 

At the same time, we believe EBSA needs to carefully consider whether those cost savings will 

be reduced or outweighed by the increased number of exemption requests it will receive from 

service providers for affiliate products and services that would be prohibited as a result of the 

proposed change. 

DCIIA Recommendation: 

DCIIA proposes that EBSA clarify or delete the words “or together with an affiliate” in paragraph 

(c)(1)(ii) so the proposed rules do not unnecessarily extend ERISA fiduciary status to persons 

providing products or services that are unrelated to or independent of the provision of fiduciary 

 

10 Additional examples are included in the preamble to the proposed rule at 75 F.R. 65266. 11 75 F.R. at 65275.
February 3, 2011 

Page 8 

investment advice by an affiliate and which are not individualized to the needs of the plan or 

otherwise considered investment advice. 

Limitations Included in the Proposed Rule Need to Be Clarified and Expanded.

Limitations of the Counterparty Exception Too Narrow. 

The proposed rules appropriately contained an exclusion from the general fiduciary definition 

where a person is acting as an adverse party to a plan in its capacity as a “purchaser or seller of 

a security or other property” or as an agent of a purchaser or seller. The “counterparty 

exception” provided in paragraph (c)(2)(i) of the proposed rule is as follows: 

. . . .a person shall not be considered to be a [covered person] with respect 

to the provision of advice or recommendations if [such person does not 

represent or acknowledge that it is acting as a fiduciary with respect to 

such advice or recommendation and] such person can demonstrate that 

the recipient of the advice knows or . . . should know, that the person is 

providing the advice or making the recommendation in its capacity as a 

purchaser or seller of a security or other property . . . , whose interests are 

adverse to the interests of the plan or its participants or beneficiaries, and 

that the person is not undertaking to provide impartial investment advice. 

However, DCIIA believes this exception should be broader and apply to other circumstances 

where there is a potential conflict of interest. For example, the exception should make clear it 

includes the selling of “services,” not just securities or property. Asset management firms and 

401(k) providers may provide educational information to plans in connection with an RFP or 

otherwise when seeking to be hired by the plan. If the proposed exception does not cover the 

sale of services (but only the sale of securities or property), the information provided by a firm 

when seeking a mandate could be viewed as investment advice (resulting in the firm being 

conflicted out from being selected by the plan and its consultant). As another example, the 

narrow reference to purchasing and selling securities or other property fails to cover common 

transactions such as securities lending, extensions of credit and other finance transactions. The 

use of “adverse interests” is also limited and does not apply to circumstances where the parties 

understand that similar or lesser conflicts of interest exist than in the purchase and sale context. 

For example, shouldn’t the exclusion also apply to brokers that disclose their compensation or 

conflicts of interest? Otherwise even agency trades, such as in the futures market, could be 

restricted.

DCIIA also asks EBSA to make clear that the exception covers not just an initial purchase or 

sale transaction, but ancillary transactions, ongoing communications and amendments or 

modifications of covered transactions. For example, if the plan purchases interests in the 

seller’s fund and then asks for ongoing valuation or educational information relating to that 

holding, the exception should apply to those ongoing communications. 

DCIIA also notes that the exception shifts the burden of proof to the seller, the cost of which will 

ultimately be charged to plans. To mitigate against this result, EBSA should make clear that the 

seller’s status can be satisfied through disclosure or in cases where a plan is already 

represented by an established fiduciary independent of the seller (such as a QPAM or INHAM). 
February 3, 2011 

Page 9 

DCIIA Recommendations: 

DCIIA proposes that EBSA revise paragraph (c)(2)(i) as follows: 

. . . . a person shall not be considered to be a [covered person] with respect 

to the provision of advice or recommendations if [such person does not 

represent or acknowledge that it is acting as a fiduciary with respect to 

such advice or recommendation and] such person can demonstrate that 

the recipient of the advice knows or . . . should know, that the person is 

providing the advice or making the recommendation in its capacity as a 

purchaser or seller of a security or other property or services or otherwise 

acting in connection with a transaction, or as an agent of or appraiser for, 

such a person, whose interests are adverse to the interests of the plan or 

its participants or beneficiaries (or whose interests are not impartial), and 

that the person is not undertaking to provide impartial investment advice. 

DCIIA also asks that EBSA provide clarification that the exception extends to follow-on advice 

and recommendations provided in modifying or terminating the transaction or services that were 

the subject of the initial advice or recommendation. The exception could also cover the 

provision of ongoing advice or recommendations incidental or appurtenant to the securities, 

property, services or transaction. Of course, we also suggest that the follow-on advice and 

recommendations would need to be subject to the same conditions (e.g., the advice or 

recommendation would be provided by a person whose interests are adverse to the interests of 

the plan or its participants or beneficiaries (or whose interests are not impartial), and the person 

would not undertake to provide impartial investment advice). EBSA should also permit the 

seller to satisfy its burden of proof (a) through disclosure of the conflict of interest or (b) when 

the plan is represented in the transaction by a QPAM or an INHAM. 

DCIIA appreciates EBSA’s inclusion of the counterparty exception and believes that these 

proposals will make the exception more useful to service providers without compromising the 

protection of plans against undisclosed conflicts. 

Investment Platform Exception Needs Clarification 

The proposed rule includes an exception for investment platform providers that states that a 

service provider will not be treated as rendering investment advice as a result of-- 

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

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

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

fiduciary may designate investment alternatives into which plan participants 

or beneficiaries may direct the investment of assets held in, or contributed 

to, their individual accounts, if the person making available such 

investments discloses in writing to the plan fiduciary that the person is not 

undertaking to provide impartial investment advice.12

The proposed rule also specifies that— 

 

12 Proposed §2510.3-21(c)(2)(ii)(B). 
February 3, 2011 

Page 10 

the provision of certain information and data to assist a plan fiduciary’s 

selection or monitoring of such plan investment alternatives will not be 

treated as rendering investment advice if the person providing such 

information or data discloses in writing to the plan fiduciary that the person 

is not undertaking to provide impartial investment advice.13

DCIIA commends EBSA for recognizing the valuable role that investment platform providers 

play in making information and data available to retirement plans and their fiduciaries by 

including the investment platform exception. As noted above, however, we are concerned that 

the proposed rule does not sufficiently provide protection needed by investment platform 

providers to be able to continue to offer broad investment choices and these services to plans 

and plan fiduciaries. 

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

investment options from a list of funds that could include thousands of choices. At various times 

in the relationship between a plan and a service provider, plan representatives, including 

designated plan fiduciaries or other professionals hired by a plan, may ask the service provider 

to provide information, tools, education or other guidance to help narrow the choice of funds 

available to the plan, including based upon evaluation criteria approved or provided by an 

independent plan fiduciary or another independent third party. While the proposed rule allows 

for the “provision of certain information and data to assist a plan fiduciary’s selection or 

monitoring of [sic] plan investment alternatives,” it does not expressly exempt the ways in which 

“information and data” will be used. 

Platform Narrowing Using Third-Party Criteria Should Not Result in Fiduciary Status. 

As discussed above, plan fiduciaries and third party experts that they hire to assist them, seek 

information and guidance necessary to assist them in meeting their fiduciary responsibilities in 

many ways. Sometimes they seek the advice of an investment manager or consultant with the 

understanding that such investment manager or consultant is intended to serve in a fiduciary 

capacity to the plan. In an effort to assist plan fiduciaries in narrowing the list of potential 

investment options from a platform with thousands of available funds, platform providers may 

engage independent third parties to construct a narrowed list of funds solely as a service to the 

plan fiduciary but not focused on the individualized needs of the plan. In other cases, plan 

fiduciaries are only seeking information and data necessary to help them meet their fiduciary 

responsibilities to the plan. This occurs when plan fiduciaries look for information to assist them 

in mapping current investments to similar options offered by a new provider, as well as in putting 

together an investment lineup or replacing a nonperforming option with one that they believe will 

perform better. Included among the many sources from which plan sponsors (and their 

consultants and third parties assisting them) often seek such information are investment 

platform providers. As noted above, given that platform providers often offer a large number of 

funds to select from on their platforms, a plan fiduciary will often expect the platform provider to 

be a resource in providing information and assistance in narrowing the list of available funds. 

To assist plan fiduciaries in narrowing platform choices, criteria that are objective or specified by 

a third party is often used as a tool to screen investment options meeting the criteria from a 

larger list of available funds. For example, a plan fiduciary might ask the platform provider to 

identify those funds in a specific asset class that are rated by Morningstar “4 stars” or 

 

13 Proposed §2510-3-21(c)(2)(ii)(C). 
February 3, 2011 

Page 11 

higher.14 Similarly, a service provider might assist a designated plan fiduciary by identifying 

funds which have beaten their Lipper ratings for the past 3, 5 and 10 year periods.15 Such 

narrowing is also performed to identify factors specified by the plan fiduciary beyond investment 

performance, such as cost, the existence of sales charges, manager tenure, the availability of 

institutional classes, etc. 

The use of narrowing criterion is widely accepted in the retirement plan investment field and its 

use need not make the platform provider a fiduciary as a result, particularly if the platform 

provider is not providing individualized advice in connection with such activity that is specific to a 

particular plan.16 It often is simply an attempt to use accepted criteria to assist the plan sponsor 

in narrowing or screening potential options, in obtaining additional information concerning 

different investment options or in reviewing how existing options are performing from the 

platform provider without an additional fee. 

As well, we believe these same (narrowing) principles can and should be applied to other 

specific circumstances, such as fund mapping and the provision of sample fund line-ups. 

DCIIA believes that, without clear guidance, service providers may not be able to continue to 

provide the type of information and data on investments available on their platforms that plan 

fiduciaries have come to expect. We are concerned that, absent clarification or modification, 

platform providers and other service providers will need to take conservative and restrictive 

approaches to avoid being treated as fiduciaries and potentially engaging in unintended 

prohibited transactions. 

DCIIA Recommendations 

In order to ensure that plan sponsors continue to get the help they seek from their providers, we 

urge EBSA to clarify or modify the investment platform exception. In this respect, the final rule 

should allow platform providers to provide information and data to a plan sponsor or its 

designated fiduciaries about plan investment options that is intended to narrow the options 

available, or assist plan fiduciaries in monitoring plan investment options, provided that any 

such assistance is based on “objective third-party criteria”, and the service provider discloses 

that (1) the assistance is not intended to be (and is not) investment advice, (2) the provider is 

not acting in a fiduciary capacity, (3) the service provider may have a financial interest regarding 

the decisions that are made (if applicable), and (4) the recipient is ultimately responsible for 

making the final decision. “Objective third-party criteria” should be defined to include criteria 

identified by the service provider, criteria from a plan’s investment policy or other criteria 

provided to the service provider by the plan sponsor or other independent fiduciary, and the 

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

criteria would be publicly available information and data on asset classes, historical 

 

14 Morningstar is a provider of independent investment research. The Morningstar RatingTM for mutual funds is a quantitative 

assessment of a fund’s past performance—both return and risk—as measured from one to five stars. It is based on a mathematical 

evaluation of past performance. Morningstar intends it will be used as a first step in the fund evaluation process. 15 Lipper is a Thomson Reuters Company that supplies mutual fund information, analytical tools, and commentary. All Lipper ratings 

are based on an equal – weighted average and represented as a percent for each measure of three-, five-, and 10-year periods. 16 Criteria used in evaluating retirement plan investments are generally understood to include: publicly available information and 

data on asset classes, historical performance, manager tenure, expense ratios, benchmarking and comparisons, and quality ratings, 

among others. 
February 3, 2011 

Page 12 

performance, manager tenure, expense ratios, benchmarking and comparisons, and quality 

ratings, among others.17

DCIIA’s suggested changes will avoid forcing plan sponsors and their designated fiduciaries 

from having to hire a fiduciary for the information and data they need and paying higher fees for 

it. It will also allow platform providers to provide assistance to their customers and prospects 

without substantial risk that they will unwillingly and inadvertently become plan fiduciaries and 

engage in prohibited transactions. 

To be clear, DCIIA is not suggesting that a platform provider providing investment advice 

intended to be relied upon or otherwise acting in a fiduciary capacity can, or should, avoid 

fiduciary status simply by providing the disclosure we have proposed. However, the smooth 

and efficient functioning of retirement savings system relies on the ability of platform providers 

to provide significant value added services to plan sponsors that are not intended to be relied 

upon, and should not be deemed to be fiduciary in nature. 

Propose Additional Limitation for When Sophisticated Parties Expressly Agree Provider 

of Advice Is Not a Fiduciary. 

DCIIA agrees that a person who represents or acknowledges that it is a fiduciary with respect to 

specific advice or recommendations should be considered a fiduciary for that purpose and to 

that extent. At the same time, DCIIA asks EBSA to consider that the parties may also expressly 

agree that the advice or recommendation is not to be relied upon as, or otherwise considered to 

be, fiduciary in nature. 

For example, a sophisticated plan fiduciary may retain an independent consultant to provide 

fiduciary advice, but may wish to also solicit information from competing sources for 

informational purposes, including as a part of an RFP process or where the plan fiduciary also 

has another existing relationship with other advisers that are knowledgeable and can provide a 

different perspective. It may also be the case that a sophisticated plan fiduciary may wish to 

receive specific information or analytics that is strictly limited in scope and may not wish to incur 

additional expenses for ERISA fiduciary level services. 

DCIIA Recommendation: 

DCIIA proposes that EBSA consider a common sense approach whereby an additional 

limitation is provided so that a person is not considered to be a fiduciary if (1) the parties 

contractually or otherwise expressly agree that the person is not expected to be a fiduciary in 

connection with the advice provide or recommendation made, (2) the plan is represented by an 

independent fiduciary that is sophisticated in such matters and (3) the advice or 

recommendation is impartial and not conflicted (i.e., the provider of the advice is impartial and 

not conflicted as to the outcome of the plan’s decision). 

Distributions

In response to EBSA’s request in the preamble to the proposed rule for comment on whether 

and to what extent the final regulation should address recommendations relating to plan 

distributions, DCIIA can provide the following comments specifically regarding DC plans: 

 

17 We note that many of the services and assistance described above are comparable to the non-fiduciary participant education 

services defined by EBSA in Interpretive Bulletin 96-1 (“IB 96-1”). 
February 3, 2011 

Page 13 

Participants who are nearing retirement with a defined contribution plan account balance have a 

great need for expert financial help, but are also uniquely vulnerable to the negative effects of 

poor or conflicted advice. These participants need to decide whether to keep their same 

investments or change them to be more consistent with a withdrawal strategy, whether to leave 

their account in the plan to take advantage of the educational support, fiduciary oversight, 

access to lower cost funds, and other benefits offered in a plan, to roll over to an IRA where 

they have more investment flexibility and an opportunity to consolidate their plan funds with 

other retirement funds, or to take a cash distribution. They must look at these decisions not only 

from the perspective of their plan account, but as part of their total financial picture. Participants 

in this situation may be looking at annuity options for the first time and require education as to 

what those options are and how they might fit in to an overall financial plan. Since the help 

participants need at this juncture is more individualized and broader than how to invest their 

plan account, their employer is unlikely to provide the type of education they need. DCIIA 

believes that EBSA’s rules and policies need to support making professional financial help 

broadly available to retiring participants. 

This group of participants is also uniquely vulnerable to negative financial impacts of poor or 

conflicted advice. Any changes to or liquidation of their investments will result in realization of 

any gains or losses in their account. If they roll their money into an IRA account they will be 

entering into a financial arrangement without the benefit of a layer of fiduciary oversight 

regarding the selection of investments or the reasonableness of fees. If they select an annuity 

option they may be irrevocably committing their retirement assets into a vehicle that may or may 

not serve their retirement income needs. DCIIA believes EBSA’s rules and policies must also 

take into account this vulnerability and protect participants against the negative effects of poor 

or uneducated investment decisions. 

The reality today is that the majority of participants who are eligible to take a plan distribution 

cash out their account balance.18 Studies have also shown that participants want one-on-one 

financial counseling, but that the majority of employers do not offer it and concern with fiduciary 

liability is a core reason why it is not offered.19 Unfortunately, less than half of participants 

nearing retirement have received professional help on critical issues such as minimizing 

exposure to investment risk, minimizing income taxes, or ordering of withdrawals.20

If financial help is to be made more broadly available to participants nearing retirement, the 

rules concerning who is or isn’t a fiduciary, and what acts are or are not fiduciary acts, need to 

be clearly delineated. In DCIIA’s view, the Department’s current position on this topic, as 

outlined most definitively in DOL Adv. Op. Ltr. 2005-03A, does not create a clear line. DCIIA 

understands the concern that some existing plan advisers might improperly use their authority 

or relationship to cross sell in a manner that improperly benefits the adviser at the expense of 

the participant. However, we do not believe that EBSA’s current position strikes the right 

balance between making meaningful help available to participants at reasonable cost, and 

protecting participants against undisclosed conflicts of interest. 

1. DCIIA Recommendations: 

DCIIA believes EBSA should develop guidelines for providing financial help to retiring 

participants consistent with the following objectives: 

 

18 “Defined Contribution Plan Distribution Choices at Retirement”, Investment Company Institute, 2007 19 “Trends and Experience in 401(k) Plans – 2009”, Hewitt Associates, LLC 20 “The Positioning of Assets in Retirement”, Life Insurance and Market Research Association (LIMRA), 2009.
February 3, 2011 

Page 14 

1. It should be clear to plan sponsors, plan participants and service 

providers when help is being offered in a fiduciary capacity. 

2. A safe harbor for plan sponsors who select and monitor financial 

advisers to assist with distribution planning should be developed to 

encourage the availability of financial help to participants at this 

critical juncture in preparing for retirement. 

3. EBSA should support the ability of financial advisers to educate 

participants about investment alternatives available both inside and 

outside the plan, as well as about general issues and education, 

such as tax planning, managing withdrawals, maintaining flexibility, 

etc., without being subject to ERISA’s fiduciary rules as long as 

clear and proper disclosures are made regarding any potential 

conflicts of interest. A new safe harbor similar to DOL Interpretive 

Bulletin 96-1 (or model disclosures), dealing more specifically with 

the type of information relevant to participants nearing retirement or 

another distributable event should be created to make clear what 

activities are permitted for non-fiduciary advisers. 

4. The DOL should retain its current position as outlined in DOL Ad. 

Op. Ltr. 2005-23A that distribution counseling services and 

recommendations that a person take a distribution are not 

investment advice under ERISA, even when combined with 

recommendations about how to invest the distributed funds. 

5. Outside or “cold calling” advisers should not be afforded greater 

access to, or influence over, plan participants than current plan 

service providers. Participants working with either type of adviser 

should receive mandated disclosures that address conflicts of 

interest, the pros and cons of keeping money in the plan versus 

rolling it over or annuitizing it, and other relevant information. 

Coordination with Other Regulatory Initiatives Is Critical.

Taking into account President Obama’s Executive Order 12866, DCIIA urges ESBA to seek 

“[g]reater coordination across agencies . . . , reducing costs and simplifying and harmonizing 

rules.” Indeed, the President observes that “some sectors and industries face a significant 

number of regulatory requirements, some of which may be redundant, inconsistent, or 

overlapping” and urges “coordination, simplification, and harmonization” among agencies to 

achieve regulatory goals while ensuring consistency and coordination where appropriate.”21

The Study on Investment Advisers and Broker-Dealers recently issued by the SEC,22 as 

required by Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010 (the “Dodd-Frank Act”), and the proposed rules published pursuant to the 

Dodd-Frank Act in late December of 2010 by the CFTC on Business Conduct Standards for 

Swap Dealers and Major Swap Participants with Counterparties,23 are both examples of where 

coordination of rulemaking is necessary to ensure that the DOL’s proposed rule will not 

 

21 http://www.whitehouse.gov/the-press-office/2011/01/18/improving-regulation-and-regulatory-review-executive-order. 22 http://www.sec.gov/news/studies/2011/913studyfinal.pdf. 23 75 F.R. 245 at 80638 
February 3, 2011 

Page 15 

undermine or conflict with the Dodd-Frank Act or lead to inconsistent regulatory requirements. 

For example, in the Section 913 Study recommendations to modify the standard of care 

applicable to broker-dealers were made with a view of minimizing cost and disruption and to 

reflect the interests of customers in having multiple fee and business models available to them 

by not strictly prohibiting them. Specifically, in recommending a uniform fiduciary standard of 

conduct, the recommendations of the study would preserve, among other things, (i) commission 

based arrangements, (ii) sale of proprietary products, and (iii) principal trades. We are 

concerned that EBSA’s proposed rule redefining the term “fiduciary” could potentially have the 

opposite result. 

Further consideration should also be given to the requirements under the Dodd-Frank Act to 

provide daily marks and scenario analyses, and whether compliance with those requirements 

could trigger ERISA fiduciary status under these proposed rules. 

We believe it is critical that the various rules on business conduct standards applicable to 

persons dealing with DC plans be harmonized in order to ensure that plans are not inadvertently 

harmed or lose access to necessary services. 

DCIIA Recommendations: 

DCIIA recommends that EBSA closely coordinate its efforts with SEC and CFTC initiatives to 

avoid inconsistent or overlapping rulemaking that would harm DC plans and participants. 

Separate efforts on related topics that address similar issues in different ways or create 

somewhat inconsistent rules with cross purposes should not be pursued. 

Transition Relief Needed to Facilitate Compliance.

DCIIA expects that EBSA will receive a number of comments and testimony on its proposed rule 

from experts, businesses and ordinary citizens. DCIIA also expects that comments received will 

highlight the broad scope and potential myriad ways in which the changes could have significant 

adverse or unintended consequences. 

EBSA stated in its preamble24 that it is uncertain whether, and to what extent, the proposed rule 

will lead to higher fees for plans and/or a compression of the plan service provider market. We 

believe EBSA needs to address concerns, particularly at a time when plan sponsors are being 

pushed to reduce fees, that this proposal will increase costs to plans, reduce the services 

available to them and shrink the number of competent service providers in the market. We ask 

EBSA to reconsider the potentially significant costs to DC plans both in actual cost and in quality 

of services available that could result from these regulations in light of these comments. 

Accordingly, we are asking EBSA to withdraw and, as appropriate, re-propose the regulations 

prior to issuing a final regulation to enable all parties to continue the process of working together 

to create best practices and better outcomes. As well, we ask that EBSA address the need for 

transition relief for those that have put in place business practices and systems over the past 

35+ years in good faith to allow for an orderly transition that does not unduly disrupt existing 

retirement plan investment programs and the products and services currently provided. 

Providers will need time to re-examine their policies, including across affiliates, that may 

currently lack the reporting systems to do so. Applicability of any proposed rule changes in 

 

24 75 F.R. 204 at 65275.
February 3, 2011 

Page 16 

these circumstances should be no earlier than two years after the promulgation of any final 

regulation. 

* * * *

Who We Are. The Defined Contribution Institutional Investment Association (DCIIA) is a nonprofit trade association dedicated to enhancing the retirement security of American workers. 

DCIIA members include investment managers, consultants, record keepers, insurance 

companies, plan sponsors and others committed to improving retirement outcomes for 

American workers by advocating for better defined contribution plan design and institutional 

investment management approaches. 

DCIIA’s Core Beliefs. DCIIA members believe the current defined contribution retirement 

system, with the adoption of institutional design approaches available today, can and will 

provide for the retirement security of working Americans. The important advances contained in 

the Pension Protection Act, particularly the safe harbor protections for plan automation features 

and appropriate default investment selection, provide plans with important guidance and 

fiduciary safeguards which can result in higher participation and savings rates, more appropriate 

investment allocations and improved long-term investment performance. 

By incorporating techniques of professional pension management found in traditional defined 

benefit pension plans, defined contribution sponsors can improve retirement savings outcomes, 

affording their employees a better quality of life in retirement while managing their own fiduciary 

liabilities in plan governance. Some of the most prominent best practices include: 

1. Flexibility in Assembling Best-in-Class Plan Design 

Plan sponsors and their consultants should have the ability to select the best combination of 

partners to meet plan needs, including investment and retirement solutions, record keeper, 

custodian, managed account, advice and other service providers. 

2. Full Support for All Investment Vehicles and Product Solution Formats 

The continued development of standard industry trading systems and information sharing 

protocols provides plan sponsors with a very wide range of DC-appropriate investment and 

pricing options which, depending on plan preferences, may be best delivered through mutual 

fund, insurance contract, collective trust or individual and institutional separate account formats. 

3. Improved Default Programs as Most Effective Path to Realizing Successful 

Outcomes 

Auto-enrollment and sufficient auto-escalation of contribution rates – coupled with a wellconstructed qualified default investment and an effective employee communications and 

education program – can generate sufficient balances for workers to fund an adequate income 

replacement rate at retirement. Spending needs and longevity risk can be addressed by 

existing as well as new post-retirement investment and income management solutions being 

introduced to the market. 
February 3, 2011 

Page 17 

4. Full Lifetime Approach to Providing Retirement Income Adequacy 

The likelihood of a successful retirement income outcome may be improved by careful attention 

during both the working (accumulation) and retirement (distribution) phases, and by including a 

combination of employer-sponsored and individual retirement accounts, to initially grow and 

ultimately preserve savings necessary to meet spending needs over an individual’s total life 

expectancy. 

5. Full Expense Transparency from All Service Providers 

Plan participants benefit from plan sponsors providing fiduciary oversight of plan economics, 

and being knowledgeable about the breakdown of all plan costs and sources of revenue, 

including but not limited to investment management, record keeping and other administrative 

expenses. 

* * * * * 
February 3, 2011 

Page 18 

Thank you again for the opportunity to provide comments to your proposed rules on the 

definition of the term “fiduciary” to improve the retirement security of American workers, 

including in defined contribution plans. DCIIA’s Core Beliefs are consistent with EBSA’s stated 

intent in the preamble to the proposed rules to facilitate best practices in the discharge of 

fiduciary duties, and “to protect participants from conflicts of interest and self-dealing” by giving 

a broader and clearer understanding of when persons providing such advice are subject to 

ERISA fiduciary standards.” In sum, we are concerned that the scope and timing of this 

proposed rule raises a number of issues for DC plans and participants that need to be 

addressed before any final rulemaking is undertaken. 

Sincerely, 

Lew Minsky 

Executive Director 

Defined Contribution Institutional Investment Association 

CHI:2493150.8