# 4

10-11:04:35PM:

Congress of the Wnited States
Washington, DE 20515

May 10, 2011 =

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‘The Honorable Hilda Solis 2 aeET Gr
Secretary = 7B x O
U.S. Department of Labor sosa OM
200 Constitution Avenue, NW “fom = <
Washington, DC 20210 ses = rr

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Dear Secretary Solis:

We are writing with respect to the Department of Labor’s proposed regulation defining the term
“fiduciary” under the Employee Retirement Income Security Act (ERISA). We understand the
Department’s desire to revisit this regulatory definition after 35 years and share the Department’s
perspective that it is critical to protect individuals from misleading investment advice.

It is precisely the importance of this regulatory project that is causing us to write, We would like
to emphasize how vital we think it is that this project be completed in a thorough way that fully
takes into account all perspectives. In the absence of a complete review of all relevant factors,
we believe that the regulation could result in investors, especially middle-income investors,

receiving far less investment information.

We applaud the Department for extending the comment period and holding a hearing. But the
Department’s own uncertainty regarding the effects of the proposed rule raises our concern. In
the preamble to the proposed regulation, the Department states:

e “The Department's estimates of the effects of this proposed rule are subject to uncertainty
. - It is possible that this rule could have a large market impact.”

e “For example, the Department is uncertain regarding whether, and to what extent, service

provider costs would increase . . ..The Department is also uncertain whether the service

provider market will shrink because some service providers would view the increased

costs and liability exposure associated with ERISA fiduciary status as outweighing the
___ benefit of continuing to service the ERISA plan market.” Boe _
e “The Department... tentatively concludes that the proposed regulation’s benefi its would

outweigh its costs.”
¢ “The Department is unable to estimate the number of small service providers that would

be affected by the proposal.”

« “The Department also is unable to estimate the increased business costs small entities
would incur if they were determined to be fiduciaries under the proposal.”

* “It is possible that some small service providers may find that the increased costs
associated with ERISA fiduciary status outweigh the benefit of continuing to service the
ERISA plan market; however, the Department does not have sufficient information to
determine the extent to which this will occur.”

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= 11504: 35PM:

As you likely have heard, much of the concern over the proposed regulations lies in the possible
unintended consequences on the marketplace. For example, some have argued the proposal could
restrict access by middle-income individuals to investment information with respect to plans and
IRAs and that it could eliminate pension plans’ ability to use swaps to manage enormous risks
that can affect the plan sponsor’s financial health. Further, given the SEC and CFTC’s work on
a related fiduciary guidance project, questions have been raised about how effectively the various
agencies are coordinating their efforts to provide clarity to investors.

Jn light of the uncertainty and the significant amount of concern expressed in the comments and
at the hearing, we urge the Department to take the time necessary to do a thorough review of the
proposed regulation and the issues and concerns that have been raised. This is especially
important since the Department did not take the preliminary step of issuing a request for
information with respect to this issue as it has done with respect to numerous other regulations.

Specifically, the Department should study the cost and market effects related-to the proposed
regulation. This should include an analysis of the cost of the proposed regulation with respect to
IRAs, an analysis which was not done in connection with the proposed regulation. Based on the
information likely to be learned in these further analyses, if appropriate, we ask the Department
to consider reproposing the regulation so that anticipated changes to the regulation can be subject
to additional public comment before a rule is finalized.

Thank you for your efforts on behalf of retirement plan participants and IRA owners across
America. We look forward to a continued dialogue on these critical issues.

A Mim

rs Matheson Dan Boren
John Barrow Leonard Boswell

Dennis Cardoza