Response to Request for Comments on Definition of the 

Term “Fiduciary” Proposed Regulation 

January 27, 2011 

Employee Benefits Security Administration 

Department of Labor 

29 CFR Part 2510 

RIN 1210-AB32 

The American Society of Pension Professionals and Actuaries (ASPPA), the National 

Association of Independent Retirement Plan Advisors (NAIRPA) and the Council of 

Independent 401(k) Recordkeepers (CIKR) appreciate the opportunity to comment on the 

proposed modifications to the regulation that defines the term “fiduciary” under section 3(21) 

of the Employee Retirement Income Security Act of 1974 (ERISA) (the “Proposed 

Regulation”).1

ASPPA is a national organization of more than 7,500 retirement plan professionals who 

provide consulting and administrative services for qualified retirement plans covering 

millions of American workers. ASPPA members are retirement professionals of all disciplines 

including consultants, administrators, actuaries, accountants, and attorneys. ASPPA is 

particularly focused on the issues faced by small- to medium-sized employers. ASPPA 

membership is diverse and united by a common dedication to the private retirement plan 

system. 

NAIRPA is a national organization of firms which provide independent investment advice to 

retirement plans and participants. NAIRPA’s members are registered investment advisors 

whose fees for investment advisory services do not vary with the investment options selected 

by the plan or participants. In addition, NAIRPA members commit to disclosing expected fees 

in advance of an engagement, reporting fees annually thereafter, and agreeing to serve as a 

plan fiduciary with respect to all plans for which a member serves as a retirement plan 

advisor. 

CIKR is a national organization of 401(k) plan service providers. CIKR members are unique 

in that they are primarily in the business of providing retirement plan services as compared to 

financial services companies who primarily are in the business of selling investments. The 

independent members of CIKR offer plan sponsors and participants a wide variety of 

investment options from various financial services companies without an inherent conflict of 

interest. By focusing their businesses on efficient retirement plan operations and innovative 

 

1

 Definition of the Term “Fiduciary,” 75 Fed. Reg. 65263 (Oct. 22, 2010). 
2

plan sponsor and participant services, CIKR members are a significant and important segment 

of the retirement plan service provider marketplace. Collectively, the members of CIKR 

provide services to approximately 68,000 plans covering 2.8 million participants and holding 

in excess of $120 billion in assets. 

Summary 

ASPPA, NAIRPA, and CIKR support the efforts of the Department of Labor (“Department”) 

to update the regulation defining the term “fiduciary” under ERISA section 3(21) (the 

“Current Regulation”).2

 As the Department recognizes, there has been considerable change in 

the retirement plan industry in the thirty-five years that have passed since the Current 

Regulation was issued.3 ASPPA, NAIRPA, and CIKR support a broadening of the definition 

of fiduciary. However, we believe that the proposal should be revised and clarified to better 

protect plan participants. ASPPA, NAIRPA, and CIKR respectfully make the following 

recommendations. 

I. Need for Updated Guidance - ASPPA, NAIRPA, and CIKR applaud the 

Department for updating the Current Regulation so that the definition of investment advice is 

consistent with current practices in the industry, which will provide enhanced protections for 

plan fiduciaries, participants and beneficiaries. 

II. Plan Level Advice Limitation - ASPPA, NAIRPA, and CIKR recommend that with 

respect to plan level investment advice given to fiduciaries, the limitation set forth in 

§ 2510.3-(21)(c)(2)(i) of the Proposed Regulation should require that explicit disclosure of the 

seller/purchaser’s conflict of interest be made in writing or electronically, in clear and 

conspicuous language, and that it be acknowledged in writing or electronically by a plan 

fiduciary. 

III. Participant Level Advice - ASPPA, NAIRPA, and CIKR recommend that the 

limitation set forth in § 2510.3(21)(c)(2)(i) of the Proposed Regulation should not apply to 

participant level investment advice and should only be available for advice given to plan 

fiduciaries. This is consistent with Congressional intent, as demonstrated by the protections 

afforded participants in this regard as enacted in the Pension Protection Act of 2006 (“PPA”) 

and set forth in ERISA §§ 408(b)(14) and 408(g). 

IV. Appraisals and Fairness Opinions - ASPPA, NAIRPA, and CIKR recommend that 

appraisals and fairness opinions be exempt from these rules due to the likelihood of added 

costs to plans and plan participants and the potential chilling effect on the availability of these 

services. 

V. Applicability to RIAs - ASPPA, NAIRPA, and CIKR recommend that the Proposed 

Regulation be clarified to provide that § 2510.3-21(c)(1)(ii)(C) of the proposal applies only to 

an individual who has actually registered as an investment advisor with the U.S. Securities 

and Exchange Commission (SEC) or a state agency of appropriate jurisdiction. 

 

2

 29 CFR § 2510.3-21. 

3

 75 Fed. Reg. at 65264. 
3

VI. Definition of Investment Advice – ASPPA, NAIRPA, and CIKR recommend that 

the Proposed Regulation be clarified to provide that investment advice does not include 

information regarding the relative value and financial effect of optional forms of benefit 

available to participants, valuations related to lump sum distributions or the division of 

property pursuant to qualified domestic relations orders (“QDROs”), or the offering of 403(b) 

investment products, and should clarify that the provision of recommendations or advice 

regarding the selection of fiduciaries would not, without additional action, cause a person to 

be considered a fiduciary. 

VII. IRAs – ASPPA, NAIRPA, and CIKR recommend that the Proposed Regulation 

should not be applied to IRAs; rather a comprehensive approach, which includes 

consideration of fee transparency, should be examined at some future date and perhaps in 

conjunction with the newly formed Consumer Protection Financial Bureau. 

VIII.Rollovers - ASPPA, NAIRPA, and CIKR recommend that the Department consider 

the question of whether a recommendation with respect to taking a plan distribution 

constitutes investment advice in conjunction with more comprehensive guidance regarding 

IRAs. 

Discussion 

I. Need for Updated Guidance 

ASPPA, NAIRPA, and CIKR applaud the Department for updating the Current Regulation so 

that the definition of investment advice is consistent with current practices in the industry, 

which will provide enhanced protections for plan fiduciaries, participants and beneficiaries. 

As the Department acknowledged in the preamble to the proposal, there is a substantial need 

for the Current Regulation to be updated as the retirement plan industry has significantly 

changed (including the creation of 401(k) plans) in the thirty-five years since the Current 

Regulation was issued.4

 

A. Need for Clarity 

It is without debate that defined contribution plans have become the predominant 

retirement vehicle for American workers. Workplace savings programs like 401(k), 

403(b), and 457 plans have become by far the most effective way for employees to save 

for retirement. In the vast majority of these plans, participants are faced with the 

responsibility of having to choose where to invest their savings. Plan fiduciaries are 

faced with the responsibility of having to choose the investment options that will be 

offered to participants. Consequently, it’s critical that both plan fiduciaries and 

participants understand whether the advice that they receive constitutes “investment 

advice” under ERISA. 

We support the Department’s efforts to bring clarity to an area in which considerable 

uncertainty currently exists. As the Department noted in the preamble, it is frequently 

unclear whether an individual is a fiduciary based on the Current Regulation’s five-part 

 

4

 75 Fed. Reg. at 65263 - 64, 65270. 
4

test.5 The Staff of the SEC has similarly recognized that recipients of advice are often 

confused about the duties and obligations of the persons providing advice to them.6

ASPPA, NAIRPA, and CIKR support the Department’s approach that any provision of 

advice results in fiduciary status if the other criteria set forth in the Proposed Regulation 

are satisfied. The Current Regulation’s requirement that advice must be provided more 

than once in order to result in fiduciary status is inconsistent with the reasonable 

expectations of plan fiduciaries today and results in an unclear rule that is difficult to 

understand and enforce. It simply makes no sense that the same advice is considered 

investment advice under ERISA merely because it is given more than once. Without 

these changes, plan fiduciaries and participants will be faced with continuing not to 

know whether or not the advice they are receiving is afforded the protections under 

ERISA. 

B. Receipt of Advice by Small Plans 

The need for clarity is particularly important with respect to small business retirement 

plans. Small business plan fiduciaries and participants generally lack the sophistication 

to appreciate whether or not the advice they are receiving is ERISA-protected advice. It 

is important to note that a large percentage of fiduciaries of small retirement plans 

believe that the recommendations that they are receiving are intended as “investment 

advice.” In a 2010 survey, 60% of fiduciaries of retirement plans with less than 200 

participants indicated that they received investment advice.7 However, it has been the 

experience of ASPPA members that the vast majority of small companies are receiving 

investment education, rather than investment advice. In other words, we believe that it is 

likely that the vast majority of this “advice” that they are receiving would not be 

considered investment advice under the Current Regulation. It is critical that fiduciaries 

of retirement plans be able to rely on the guidance that they reasonably believe is being 

provided as investment advice or be clearly informed that they are not receiving 

investment advice. 

In the event that such a large percentage of small companies are actually receiving 

ERISA-protected investment advice, we would anticipate that the Department would 

receive significant support for the Proposed Regulation. We anticipate that individuals 

who are providing such investment advice have already embraced their status as 

 

5

 75 Fed. Reg. at 65271. 

6

 Staff of the U.S. Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers, pp. 

v, 93-101, Jan. 2011, available at http://sec.gov/news/studies/2011/913studyfinal.pdf (stating “Many retail 

investors and investor advocates submitted comments stating that retail investors do not understand the 

differences between investment advisers and broker-dealers or the standards of care applicable to broker-dealers 

and investment advisers. Many find the standards of care confusing, and are uncertain about the meaning of the 

various titles and designations used by investment advisers and broker-dealers. Many expect that both 

investment advisers and broker-dealers are obligated to act in the investors’ best interests. The Commission has 

sponsored studies of investor understanding of the roles, duties and obligations of investment advisers and 

broker-dealers that similarly reflect confusion by retail investors regarding the roles, titles, and legal obligations 

of investment advisers and broker-dealers, although the studies found that investors generally were satisfied with 

their financial professionals.”). 

7

 Profit Sharing/401k Council of America (PSCA), 53rd Annual Survey of Profit Sharing and 401(k) Plans. 
5

fiduciaries and would want others who are providing similar services to be held to the 

same standards. 

C. Importance of Department’s Role in This Area 

Opponents of the Proposed Regulation may argue that the Department should delay 

consideration of this matter until the SEC completes its determination of what type of 

fiduciary standard should generally apply to those engaged in the dealing of securities.8

They might argue for such delay to prevent any inconsistencies that could arise between 

the applicable fiduciary standards developed by the SEC and the Department.9

 However, 

regardless of any inconsistencies, ASPPA, NAIRPA, and CIKR believe there are 

legitimate reasons for differences in standards that could arise. The Department has been 

tasked by Congress with protecting the interests of participants and beneficiaries in 

employee benefit plans. Unlike retail advice provided by brokers, advice given to plan 

fiduciaries directly impacts other individuals, that is, participants and beneficiaries. As a 

result, it is appropriate that persons providing advice to retirement plans be subject to 

rules that are specifically designed for these arrangements. 

D. Disclosure 

Opponents of the Proposed Regulation will also argue that if implemented, the new 

definition of investment advice will undermine the distribution of retirement plans, 

particularly to small businesses, by effectively precluding the industry from selling 

them. This is simply not the case. In reality, the practical effect of the Proposed 

Regulation would be to require plan fiduciaries to receive a disclosure in those cases in 

which advisors choose not to assume fiduciary responsibility as an ERISA investment 

advisor. 

One of the most significant limitations contained in the Proposed Regulation is for 

individuals who give conflicted investment advice under certain circumstances (the 

“Conflicted Advice Limitation”).10 In order to rely on this limitation, the individual must 

not have represented or acknowledged that he or she was acting as a fiduciary. 

Additionally, it must be demonstrated that the recipient of the advice knew, or 

reasonably should have known, that: (1) the advice or recommendation was made by the 

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

appraiser for the purchaser or seller); (2) the individual had interests that are adverse to 

the plan or its participants; and (3) the individual was not endeavoring to provide 

impartial advice. 

 

8

 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.L. 111-203. 

9

 In any event, the approach taken by the Department is consistent with the recommendations of the Staff of the 

SEC in its Study on Investment Advisers and Broker-Dealers. In that study, the Staff recommended that 

commission-based compensation be allowed as long as there is disclosure of conflicts of interest. See, Staff of 

the U.S. Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers, pp. vi-vii, 

112-13, Jan. 2011. 

10 Prop. Reg. § 2510.3-21(c)(2)(i), 75 Fed. Reg. at 65277. 
6

The Proposed Regulation is significant in that it does not prohibit individuals who have 

a conflict of interest from providing advice, but instead merely requires that they 

disclose such information to the person receiving the advice in order to avoid fiduciary 

status. We note that the Department could have made the limitation much more narrow 

in scope. For example, the Department could have stated that the provision of conflicted 

advice was a prohibited transaction unless an exemption was satisfied. In this way, such 

individuals would otherwise be subject to fiduciary responsibilities under ERISA. 

Instead, by embedding the limitation in the regulation, such individuals can avail 

themselves of the opportunity to be completely exempt from any fiduciary 

responsibilities merely by providing appropriate disclosure materials.11 

We would anticipate that the industry would be supportive of the Department’s 

disclosure approach in the Proposed Regulation given its previous support of the 

legislation originally proposed by Speaker John Boehner, when he was Chairman of the 

House Education and the Workforce Committee, that would have permitted conflicted 

investment advice as long as disclosures were made to the persons (including plan 

fiduciaries) who received the advice.12 The Pension Protection Act of 2005 would have 

required: 

[A] written notification (which may consist of notification by means of 

electronic communication)— 

“(i) of all fees or other compensation relating to the advice that the 

fiduciary adviser or any affiliate thereof is to receive (including 

compensation provided by any third party) in connection with the 

provision of the advice or in connection with the sale, acquisition, or 

holding of the security or other property, 

 

11 As discussed later, we believe such disclosure should be more formalized. See Section II. We also 

acknowledge that the language that may be required in such a disclosure as contemplated by the Proposed 

Regulation is arguably a bit harsh. For example, the word “adverse” seems overly negative. We would instead 

recommend that the Department develop model disclosure language that clearly discloses the conflict without 

too negative a connotation. 

12 For example, the American Council of Life Insurers (ACLI) testified that it strongly supported the Retirement 

Security Advice Act of 2001 (H.R. 2269), which would have permitted advisors to receive variable 

compensation as long as participants were provided with written notification of the compensation received by the 

advisor and conflicts that related to the advice, available at 

http://benefitslink.com/articles/aclitestimony010717.html. The Investment Company Institute (ICI) has also 

applauded Speaker Boehner for introducing legislation that would allow conflicted advice with disclosures. See 

“ICI Applauds Subcommittee Approval of Retirement Advice Bill”, Jul. 19, 2000, available at 

http://conference.ici.org/pressroom/news/NEWS_00_401K_ADVICE2 (supporting the Retirement Security 

Advice Act of 2000); “ICI Applauds Introduction of ‘Retirement Security Advice Act’”, Jun. 21, 2001, available 

at http://www.ici.org/policy/retirement/retirement/NEWS_01_401K_ADVICE (supporting the Retirement 

Security Advice Act); and “ICI Commends Chairman Thomas for Advancing Key Retirement Legislation”, Nov. 

9, 2005, available at http://conferences.ici.org/pressroom/news/ci.05_news_hr2830_2.print (supporting The 

Pension Protection Act of 2005). Additionally, the Securities Industry and Financial Markets Association 

(SIFMA) testified that it supported the Department’s investment advice regulations that were issued in January 

2009 (which were later withdrawn) that would have allowed affiliates of advisors to receive variable 

compensation as long as disclosures of material conflicts were made to the recipients of the advice, available at 

http://edlabor.house.gov/documents/111/pdf/testimony/20090324MelanieNussdorfTestimony.pdf. 
7

“(ii) of any material affiliation or contractual relationship of the fiduciary 

adviser or affiliates thereof in the security or other property, 

“(iii) of any limitation placed on the scope of the investment advice to be 

provided by the fiduciary adviser with respect to any such sale, 

acquisition, or holding of a security or other property, 

“(iv) of the types of services provided by the fiduciary adviser in 

connection with the provision of investment advice by the fiduciary 

adviser, 

“(v) that the adviser is acting as a fiduciary of the plan in connection with 

the provision of the advice, and 

“(vi) that a recipient of the advice may separately arrange for the 

provision of advice by another adviser, that could have no material 

affiliation with and receive no fees or other compensation in connection 

with the security or other property...13

The requirement that “any material affiliation or contractual relationship of the fiduciary 

adviser or affiliates thereof in the security or other property” be revealed is clearly 

consistent with the disclosure concepts contemplated by the Proposed Regulation. 

II. Plan-Level Advice Limitation

As discussed above, the Proposed Regulation includes a limitation that restricts its application 

to individuals who give conflicted investment advice under certain circumstances.14 In order 

to rely on this limitation, the individual must not have represented or acknowledged that he or 

she was acting as a fiduciary. Additionally, it must be demonstrated that the recipient of the 

advice knew, or reasonably should have known, that: (1) the advice or recommendation was 

made by the individual as a purchaser or seller of a security or other property, (or as an agent 

of or appraiser for the purchaser or seller); (2) the individual had interests that are adverse to 

the plan or its participants; and (3) the individual was not endeavoring to provide impartial 

advice. Unlike other limitations contained in the Proposed Regulation, this Conflicted Advice 

Limitation does not require any explicit disclosure be given in conjunction with the conflicted 

advice. It instead depends entirely on proving what the recipient knew or should have 

otherwise known about the impartiality of the individual giving the advice. 

The practical effect of the limitation is to shift the burden of proving compliance to the 

individual providing the advice or recommendation. Although this approach may be useful to 

large companies, small business owners will not have the resources to hire counsel to 

determine whether the advice provider qualified for the limitation or was instead acting as a 

fiduciary. As a result, this approach alone will not provide adequate protection to the plans of 

small companies. 

To ensure that plan fiduciaries fully understand the conflicted nature of the information being 

provided by the advisor, ASPPA, NAIRPA, and CIKR recommend that the Conflicted Advice 

 

13 H.R. 4 (2005). Similar language was contained in earlier legislation introduced by Speaker Boehner. 

14 Prop. Reg. § 2510.3-21(c)(2)(i), 75 Fed. Reg. at 65277. 
8

Limitation contain more explicit disclosure requirements. The Proposed Regulation could 

allow an individual to escape fiduciary liability by simply burying the necessary language 

deep inside massive amounts of materials provided to the plan’s fiduciaries. 

Both plans and providers will be better served if there is less ambiguity in the law. By 

enacting a clear rule with detailed requirements, service providers will know what is required 

of them and plans will have greater understanding of the types of services being provided. 

This more direct and objective approach would enable all service providers to more easily 

know that they are satisfying the requirements of the Conflicted Advice Limitation. 

Furthermore, the Department has indicated in the preamble to the Proposed Regulation its 

desire to focus its investigations on the conduct of individuals.15 However, the Department, 

through the Conflicted Advice Limitation, creates additional obstacles to enforcement. Under 

the proposal, instead of determining whether an individual has satisfied the Current 

Regulation’s five-part test, the Department will have to focus on inherently factual issues of 

whether oral communications were made, what actually was said, were there written materials 

that covered these matters and were they made available to fiduciaries; or was there another 

basis by which the fiduciary reasonably should have known that the individual was providing 

the advice in his capacity as a purchaser or seller of a security and that the person was not 

undertaking to provide impartial investment advice. Although an individual seeking to avoid 

fiduciary status would have the burden of demonstrating compliance with the limitation, the 

Department would still face the challenge in enforcement actions of focusing on the limitation 

criteria rather than the misconduct at issue. 

ASPPA, NAIRPA, and CIKR recommend that the Conflicted Advice Limitation apply only 

to an individual if there is explicit written or electronic disclosure of the individual’s conflict 

of interest in clear and conspicuous language, and acknowledged in writing or electronically 

by a plan fiduciary to ensure that plan fiduciaries understand the circumstances under which 

conflicted advice is being given.16

III. Participant-Level Advice

The Proposed Regulation also makes the Conflicted Advice Limitation available for certain 

advice and recommendations to participants. However, the Conflicted Advice Limitation, 

when applied to participant-level investment advice, is inconsistent with Congressional intent 

as evidenced in PPA,17 which specifically limited the circumstances under which conflicted 

advice could be given to participants.18 Congress intended these rules to apply to persons who 

are fiduciaries as a result of providing investment advice, known as “fiduciary advisers.”19

 

15 75 Fed. Reg. at 65265. 

16 As indicated previously, we believe that it would be preferable if the Department provided a model disclosure 

that would satisfy this requirement. 

17 Public Law 109-280. 

18 Codified at 29 USC §§ 1108(b)(14); 1108(g) (i.e., ERISA §§ 408(b)(14) & 408(g) ). ERISA § 408(g) 

generally provides that a person who is providing investment advice by means other than a computer model 

must: (1) have level fees; (2) obtain express authorization by a separate fiduciary; (3) have an annual audit 

performed; (4) make required disclosures; (5) satisfy standards for the presentation of information; and (6) 

maintain adequate records. 

19 ERISA § 408(g)(11)(A) (defining the term “fiduciary advisor”). 
9

Congress previously considered and rejected the idea that participant disclosures could 

mitigate the potential harm of allowing fiduciary advisors to give conflicted investment 

advice.20

The Proposed Regulation circumvents the rules established by Congress by allowing persons 

who are providing investment advice to avoid compliance with the requirements imposed by 

PPA. The Conflicted Advice Limitation states that persons providing investment advice to 

participants will not be fiduciaries if they satisfy the disclosure requirements contained in the 

Proposed Regulation. This effectively provides an exception to the protections enacted under 

PPA, as an individual qualifying for the Conflicted Advice Limitation would not be a 

fiduciary and therefore would not be a “fiduciary adviser” under PPA. As a result, these 

individuals would escape the PPA protections applicable to participant-level investment 

advice. 

ASPPA, NAIRPA, and CIKR recommend that the Department amend the Proposed 

Regulation to provide that the Conflicted Advice Limitation is restricted to advice given to 

plan fiduciaries (and is inapplicable to participant-level investment advice). 

IV. Appraisals and Fairness Opinions

The Proposed Regulation states that persons may be fiduciaries if they provide appraisals or 

fairness opinions regarding the value of securities or other property. ASPPA, NAIRPA, and 

CIKR recognize that the proper valuation of employer securities held by employee stock 

ownership plans (ESOPs) has been an area of concern for the Department.21 However, 

ASPPA, NAIRPA, and CIKR believe that the approach taken in the Proposed Regulation is 

inconsistent with Congressional intent in this area. Code § 401(a)(28) provides that ESOP 

valuations must be performed by “independent appraisers.” The Code defines “independent 

appraisers” as individuals who hold themselves out to the public as appraisers or who perform 

appraisals on a regular basis, meet certain qualifications, and declare that they understand that 

they may be subject to penalties for certain acts.22 These requirements already put these 

special service providers on notice about their important role in relation to plans. 

Notwithstanding a Code section that specifies this significant role, Congress chose not to 

consider “independent appraisers” to be plan fiduciaries. Thus, Congress has indicated its 

belief that the qualifications to perform this type of service are sufficient to ensure the 

professionalism of appraisers, while at the same time reflecting the legislative intent that 

appraisers of ESOPs not be considered fiduciaries merely as a result of providing their 

customary plan services. 

Moreover, forcing independent appraisers to be fiduciaries will likely increase the costs 

associated with appraisals and fairness opinions. Appraisers will be taking on additional 

responsibilities and liability by virtue of this new title. It is hard to imagine that they will 

glibly do so without charging extra for this. Furthermore, independent appraisers will likely 

need to purchase additional insurance for their new potential fiduciary liability. Both of these 

 

20 House Report of the Committee on Education and the Workforce on the Pension Protection Act of 2005, H. 

Rept. 109-232, Part 1, pp.279-282 (discussing Minority Views). 

21 75 Fed. Reg. at 65265. 

22 Code § 401(a)(28)(C); Treas. Reg. § 1.170A-13(c)(5). 
10

will increase plan costs, without any expectation that the performance of the appraiser – as 

required by his or her professional designation – will be in any way augmented. 

Furthermore, there are a limited number of experienced independent appraisers who value 

employer securities and other hard-to-value assets. If persons are considered fiduciaries as a 

result of providing appraisals and fairness opinions, ASPPA, NAIRPA, and CIKR believe that 

many of these experienced independent appraisers will cease to provide these types of 

services. As a result, plans would have fewer choices for service providers, which would 

likely increase the costs for these services. 

If the Department is convinced specifically that appraisers of employer securities for ESOPs 

should be considered fiduciaries (as the preamble to the Proposed Regulation suggests),23

ASPPA, NAIRPA, and CIKR encourage the Department to limit application of the rule (if at 

all) only to appraisals relating to employer securities purchased, sold, or held by an ESOP. 

ASPPA, NAIRPA, and CIKR recommend that the final regulation not require that persons 

providing appraisals or fairness opinions are fiduciaries; or alternatively, if the Department is 

unwilling to take that approach, to limit application of the fiduciary status to individuals 

appraising employer securities purchased, sold or held by an ESOP. 

V. Applicability to RIAs

The Proposed Regulation provides that a person may be a fiduciary if he is “an investment 

adviser within the meaning of Section 202(a)(11) of the Investment Advisers Act of 1940” 

(the “Advisers Act”). The Advisers Act defines an “investment adviser” by reference to the 

types of services they perform.24 The definition does not require such persons to register with 

the SEC.25 

The Proposed Regulation does not specify whether a person who satisfies the definition of an 

“investment adviser” under the Advisers Act, but who does not register with the SEC would 

be considered a fiduciary. As a result, there is confusion as to who is covered by the Proposed 

 

23 75 Fed. Reg. at 65265. 

24 Section 202(a)(11) of the Advisers Act states “ ‘Investment adviser’ means any person who, for compensation, 

engages in the business of advising others, either directly or through publications or writings, as to the value of 

securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and 

as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not 

include (A) a bank, or any bank holding company as defined in the Bank Holding Company Act of 1956 which 

is not an investment company; (B) any lawyer, accountant, engineer, or teacher whose performance of such 

services is solely incidental to the practice of his profession; (C) 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 receives no special 

compensation therefor; (D) the publisher of any bona fide newspaper, news magazine or business or financial 

publication of general and regular circulation; (E) any person whose advice, analyses, or reports relate to no 

securities other than securities which are direct obligations of or obligations guaranteed as to principal or interest 

by the United States, or securities issued or guaranteed by corporations in which the United States has a direct or 

indirect interest which shall have been designated by the Secretary of the Treasury, pursuant to section 3(a)(12) 

of the Securities Exchange Act of 1934, as exempted securities for the purposes of that Act; or (F) such other 

persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or 

order.” 

25 That requirement is contained in Section 203 of the Advisers Act. 
11

Regulation. There are already rules establishing when an individual must be registered as an 

investment adviser with the SEC or in the state in which the person does business. We 

encourage the Department to avoid compounding the ambiguity that already exists in terms of 

whether persons are providing advice or making a recommendation with having to determine 

whether they are an “investment adviser” under the Advisers Act if they have not registered 

with the SEC or a state agency of appropriate jurisdiction. 

ASPPA, NAIRPA, and CIKR recommend that the Department clarify in the final regulation 

that a person is covered by § 2510.3-21(c)(1)(ii)(C) of the Proposed Regulation only if the 

individual has registered as an investment advisor with the SEC or a state agency of 

appropriate jurisdiction. 

VI. Definition of Investment Advice

A. Management Decisions 

The Proposed Regulation states that a person may become a fiduciary as a result of 

providing advice or recommendations as to “the management of securities or other 

property.”26 The preamble to the Proposed Regulation states that “[t]his would include, 

for instance, advice and recommendations as to the exercise of rights appurtenant to 

shares of stock (e.g., voting proxies), and as to the selection of persons to manage plan 

investments.”27

The Proposed Regulation is unclear as to what types of services would be considered 

“the management of securities or other property,” other than the two specific examples 

provided in the preamble. In our view, both the term “management” and “property” are 

broad terms that require further definition or at least examples to make the intention of 

the regulation clear. For example, the Proposed Regulation does not clearly indicate 

what is meant by the “selection of persons to manage plan investments.” Would this 

include the recommendation or advice regarding the selection of: (i) an ERISA § 3(38) 

investment manager for a portion of the plan’s assets, (ii) an advisor who would provide 

non-discretionary investment advice, (iii) the manager of a securities lending program, 

the manager of real property held by the plan, and/or (iv) the manager of a limited 

partnership in which the plan invests at the direction of the plan’s fiduciaries? Although 

it would appear that the individuals performing these functions would be fiduciaries, it 

is unclear whether the person who recommends or provides advice regarding the 

selection of such a service provider would also be considered a fiduciary under ERISA § 

3(21)(A)(ii). 

ASPPA, NAIRPA, and CIKR recommend that the Department clarify that the provision 

of recommendations or advice regarding the selection of fiduciaries would not, without 

additional action, cause a person to be considered a fiduciary. 

 

26 Prop. Reg. § 2510.3-21(c)(1)(i)(A)(3). 

27 75 Fed. Reg. at 65266 (footnotes omitted). 
12

B. Calculations 

The Proposed Regulation provides that a person may be rendering investment advice if 

the individual provides advice concerning the value of securities or other property.28 It is 

unclear under the Proposed Regulation whether investment advice would include the 

provision of information concerning the relative value and financial effect of the 

different optional forms of benefit available to a participant as required by Treasury 

Regulation § 1.417(a)(3)-1. Similar concerns relate to valuation of an annuity stream for 

the purpose of making a lump sum distribution, or valuation of benefits for division 

under a qualified domestic relations order. These types of services have traditionally 

been performed in a non-fiduciary capacity. If individuals providing these services were 

now classified as fiduciaries, the associated costs would almost certainly increase 

because of the need to account for their new potential fiduciary liability. 

ASPPA, NAIRPA, and CIKR recommend that the final regulation clarify that a person 

will not become a fiduciary solely as a result of providing information concerning the 

relative value and financial effect of optional forms of benefit available to participants 

as required by Treasury Regulation § 1.417(a)(3)-1 and valuations related to lump sum 

distributions and the division of property pursuant to QDROs. 

C. 403(b) Products 

The Proposed Regulation provides that a person may be rendering investment advice 

when the individual makes recommendations as to the advisability of investing in, 

purchasing, holding or selling securities.29 The Proposed Regulation includes a 

limitation for marketing or making securities or other property available through a 

platform or similar mechanism that is not based on the individualized needs of the plan 

or its participants.30 (The platform or similar mechanism allows the plan fiduciary to 

designate the investment alternatives that will be made available to participants.) The 

person making the platform or similar mechanism available must also disclose in writing 

that he or she is not endeavoring to provide impartial investment advice. The purpose of 

the platform (or similar mechanism) is to allow the plan fiduciary to pick the investment 

alternatives that will actually be offered to participants from a larger “menu” of 

investments otherwise available. 

Unlike 401(k) plans, Section 403(b) plans are required to invest exclusively in annuity 

contracts, custodial accounts, and retirement income accounts (collectively “403(b) 

products”).31 403(b) products often provide participants with an extremely large variety 

of investment options wrapped in an annuity contract. More recently, 403(b) products 

have begun to be offered through an open architecture multi-fund-type investment 

platform. In these circumstances, the limitation would be applicable to a 403(b) plan 

only if the manner in which the securities are marketed is treated as a “similar 

mechanism” under the regulation. We believe that it should apply. 

 

28 75 Fed. Reg. at 65277. 

29 Prop. Reg. § 2510.3-21(c)(1)(i)(A)(2). 

30 Prop. Reg. § 2510.3-21(c)(2)(ii)(B). 

31 Code § 403(b). 
13

The limitation should extend to a 403(b) provider who is simply offering to plan 

fiduciaries 403(b) products from which investments may be designated, assuming 

individualized investment advice is not otherwise provided. Clarification of the 

limitation in this way is necessary for the 403(b) market to function effectively and 

provide both plan fiduciaries and participants with a wide array of investment choices. 

It is important for plan fiduciaries to be able to select from a wide variety of 403(b) 

products and providers. Fewer choices would be the likely result if providers exit the 

403(b) market because of the potential for fiduciary liability and the added costs 

associated with compliance. Fewer providers competing in the market will drive up 

costs for all participants. 

ASPPA, NAIRPA, and CIKR recommend that the Department clarify that the limitation 

contained in § 2510.3-21(c)(1)(ii)(B) of the Proposed Regulation applies to a 403(b) 

provider who is simply offering 403(b) products to plan fiduciaries on a nonindividualized basis where appropriate disclosures have otherwise been made. 

VII. IRAs

IRAs represent an important vehicle for individuals to save for retirement. The Investment 

Company Institute reports that in May 2010, there were 48.6 million (or 41 percent of) U.S. 

households who reported owning IRAs.32 The need for guidance and enforcement in this area 

is significant.

The Department has not yet addressed in a comprehensive fashion the issues that impact 

IRAs. In fact, the Department specifically excluded IRAs from its regulation on participantlevel fee disclosure.33 Nevertheless, the Proposed Regulation is slated to apply to investment 

advice given to IRA owners and beneficiaries. This inconsistency is problematic. 

Guidance for retail IRAs34 needs to be considered in a comprehensive manner due to the 

fundamental differences between IRAs and qualified retirement plans. Unlike retirement 

plans, retail IRAs are not maintained by employers or employee organizations for the purpose 

of providing retirement income to employees.35 Unlike individuals in 401(k) plans, 

individuals with IRAs have greater flexibility regarding their investments and their 

management. Additionally, retail IRAs are not subject to the vast majority of rules under 

ERISA and the Code that apply to qualified retirement plans.36

It is our experience that no agency within the federal government has any current significant 

enforcement regime with respect to IRAs. Any regulatory initiative in the IRA area must be 

supported by an active enforcement regime to ensure consistent application. 

 

32 The Role of IRAs in U.S. Households’ Saving for Retirement, 2010, Investment Company Institute (ICI), 

available at http://ici.org/pdf/fm-v19n8.pdf. 

33 75 Fed. Reg. 64910, 64912 (Oct. 20, 2010). 

34 The term “retail IRAs” refers to individual retirement accounts and individual retirement annuities under Code 

section 408 that are not part of Simplified Employee Pensions (SEPs) and Simple-IRA Plans. 

35 ERISA § 3(2). 

36 For example, IRAs are not subject to ERISA’s reporting, disclosure, or participation requirements or the 

Code’s nondiscrimination requirements. 
14

ASPPA, NAIRPA, and CIKR recommend that the Department exclude IRAs from the 

Proposed Regulation and instead consider issuing more comprehensive guidance that 

addresses key topics in the context of retail IRAs (and rollovers) and perhaps in conjunction 

with the newly formed Consumer Protection Financial Bureau. 

VIII. Rollovers

In the preamble to the Proposed Regulation, the Department requested comments on whether 

and to what extent the final regulation should define the provision of investment advice to 

encompass recommendations related to taking a plan distribution.37 In a 2005 Advisory 

Opinion, the Department opined that a recommendation to a participant to take a distribution 

is not advice that would make the person giving the recommendation a fiduciary, even when 

the individual provides additional recommendations with respect to IRA investments.38 Thus, 

non-fiduciary service providers are in a position to offer rollover opportunities to participants 

and beneficiaries for whom they are already providing services. If a recommendation to take a 

distribution were considered to be the provision of investment advice, such service providers 

would be effectively precluded from offering such rollover products. 

The vast majority of retirement plan service providers who choose to discuss rollover options 

with participants are offering high quality and reasonably priced products. Further, by 

discussing rollover options with participants early on in the process, they are often in a 

position to prevent possible leakage (i.e., the participant failing to roll over the account at all). 

If the Department issues rules that effectively preclude these service providers from engaging 

participants in this manner, it will create an uneven playing field in the rollover market. This 

is because, as noted earlier, there is practically no enforcement of any federal rules that apply 

in the context of IRAs. As a consequence, independent vendors of IRA products, like selfdirected IRAs, would be free to aggressively pursue rollovers while more established vendors 

would not. 39 This would not be to the benefit of participants and beneficiaries. 

Until a comprehensive regulatory and enforcement scheme is applied to IRAs in a uniform 

manner, we strongly believe the Department should not change their current approach to 

distributions and rollovers. 

ASPPA, NAIRPA, and CIKR recommend that the Department consider the question of 

whether a recommendation with respect to taking a plan distribution constitutes investment 

 

37 75 Fed. Reg. at 65266. 

38 Advisory Opinion 2005-23A, Question 2. 

39 For example, the United States District Court for the Western District of Missouri recently approved a 

settlement for $19.4 million to resolve a case where the plaintiffs had alleged that H&R Block deceptively 

marketed IRAs that contained hidden fees. See, In re: H&R Block, Inc., Express IRA Marketing Litigation, Case 

No. 4:06-md-01786 (W.D. MO 2010). Additionally, the State of Oregon’s Division of Finance and Corporate 

Securities (DFCS) and the Kansas Insurance Department warn individuals about investing their IRAs in viatical 

settlement securities because they can lose their favorable tax treatment. See, 

http://www.dfcs.oregon.gov/faqs/faq_pages/viatical.html and 

http://www.google.com/url?sa=t&source=web&cd=8&ved=0CDMQFjAH&url=http%3A%2F%2Fwww.ksc.ks.

gov%2Fedu%2Fviatical.pdf&ei=RWf5TKC-LcOclgeS7-

ybBw&usg=AFQjCNHifNhT5d7BWZMdhxBXA8ywZCvE0A. 
15

advice in conjunction with more comprehensive guidance regarding IRAs to be issued at a 

later date. 

These comments were primarily authored by Debra A. Davis, APM with input from ASPPA’s 

Department of Labor, Defined Benefit and Tax-Exempt/Governmental Plans Subcommittees 

of the Government Affairs Committee. We welcome the opportunity to discuss these issues 

with you. If you have any questions regarding the matters discussed herein, please contact 

Craig Hoffman, General Counsel and Director of Regulatory Affairs at (703) 516-9300. 

Thank you for your time and consideration. 

Sincerely, 

 

/s/ 

Brian H. Graff, Esq., APM 

Executive Director/CEO 

/s/ 

Tommy Thomasson, Chair 

Council of Independent 401(k) Recordkeepers 

/s/ 

Judy A. Miller, MSPA 

Chief of Actuarial Issues 

/s/ 

Craig P. Hoffman, Esq., APM 

General Counsel 

/s/ 

Mark Dunbar, MSPA, Co-Chair 

Gov’t Affairs Committee 

/s/ 

Ilene H. Ferenczy, Esq., APM, Co-Chair 

Gov’t Affairs Committee 

/s/ 

James Paul, APM, Co-Chair 

Gov’t Affairs Committee