7. E-disclosure advances, no sign of fiduciary rule.
Labor is currently reviewing comments to a proposed rule that would establish a new safe harbor for using electronic media to deliver required plan documents.
If adopted, electronic delivery can be the default method for providing documents, so long as participants can opt out if they prefer paper documents.
Sponsors have been calling for the policy for years. In 2016, Labor estimates that just under half of approximately 120 million plan participants received plan documents through the mail. Labor estimates that the new proposed safe harbor will result in $2.4 billion in savings over 10 years.
While Labor said it was aiming to propose a fiduciary rule and new prohibited transaction exemptions by the end of the year, a proposed rule has yet to be sent to the Office of Management and Budget for review, making an end-of-year deadline all but impossible to meet. (Photo: Shutterstock)
1. SEC finalizes Reg BI.
In June, the Securities and Exchange Commission finalized a package of rules that will impact investing and retirement advice.
Under Regulation Best Interest, broker-dealers in the retail market will have new obligations of disclosure, care, conflict-of-interest mitigation, and compliance.
Under the care obligation, all investment recommendations must be made in the investor’s best interest. All fees on investments will have to be disclosed. In the eleventh hour, the SEC extended the obligations to cover advice on IRA rollovers.
The dissenting vote, cast by Commissioner Robert Jackson, was representative of consumer advocates who had supported the Labor Department's fiduciary rule and were critical of Reg BI throughout the rulemaking process. Jackson argued that the best-interest standard falls short of a fiduciary standard, and will let brokers give conflicted advice, so long as it is disclosed.
Clayton hit back at critics, saying their arguments ranged from false and misleading to simple “nonsense.” (Photo: Diego M. Radzinschi/ALM
2. SEC lowers the hammer on fiduciaries.
If Chair Clayton is an industry plant doing Wall Street’s bidding—as his critics imply— a growing list of fiduciary firms around the country is not getting the memo.
Under Clayton, the SEC enlisted a share-class disclosure initiative, a program that lets registered fiduciary advisories self-report disclosure violations on 12b-1 fees and instances where higher-cost share classes were recommended instead of lower-cost shares of the same funds.
In March, the SEC settled with 79 firms, resulting in $125 million to be returned to investors. Another 17 settlements were announced in the fall. In fiscal year 2019, stand-alone cases brought against investment advisory firms, under the disclosure initiative as well as outside of it, nearly doubled from 2018.
In August, the SEC brought charges against Commonwealth Financial Network for failing to disclose $100 million in revenue-sharing to its brokerage arm. (Photo: Diego M. Radzinschi/ALM)
3. Acosta forced out at Labor.
In July, Labor Secretary Alexander Acosta resigned amid a media swarm questioning his role as U.S. Attorney for the Southern District of Florida in brokering a plea deal with Jeffery Epstein.
Acosta had replaced President Trump’s original Labor nominee, Andrew Puzder and was seen as a safe alternative to the sometimes-controversial Puzder.
In 2007, while Acosta was the top federal law enforcement official in Miami, Epstein received an 18-month work release sentence for victimizing under-age women.
In a press conference days before his resignation, Acosta defended his role intervening in state court to secure a conviction against Epstein. “I wanted to help them—we wanted to help them,” Acosta said of Epstein’s victims. “That’s why we intervened and put the world on notice that he was and is a sexual predator.” (Photo: J.Albert Diaz/ALM)
4. SECURE Act future insecure.
In May, the House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act by a 417 to 3 vote .
It was expected to sail through the Senate, and be law by now. But several holds in the Senate relating to non-retirement provisions of the bill prevented it from advancing with unanimous consent.
Then this fall, legislators attempted to attach the SECURE Act to a spending bill. But that died, as Congress failed to fully fund the government for next year, instead passing clean continuing resolutions.
Unless it's attached to a spending bill before Congress adjourns for the holidays, the SECURE Act could be reintroduced in the Senate next year and advance by regular order. That is certainly feasible. But it will be more difficult with each passing day during an election year. If it doesn’t get passed by the end of Trump’s first term, it will have to be completely reintroduced in the next Congress. (Photo: AP)
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5. Reorg at EBSA.
The Employee Benefits Security Administration, Labor's regulation and enforcement arm that oversees around 703,000 private-sector retirement plans under ERISA, underwent a significant reorganization of its top leadership, effective October 1.
The restructuring aims to expedite the guidance and rule-making agenda of the Trump administration. Oversight of the Office of Regulations and Interpretations and the Office of Exemption and Determinations is now under the Principal Deputy Assistant Secretary, which is a politically appointed position. Rule-making and exemption responsibilities were previously overseen by a career bureaucrat.
Senior Democratic lawmakers questioned the need for the reorganization. (Photo: Mike Scarcella/ALM)
6. MEPs finalized,
The Labor Department released a final rule on Multiple Employer Plans that it says “could” offer small businesses more affordable and less burdensome retirement plans, and level the playing field for their employees by getting them access to lower-cost savings plans.
Under the rule, MEP sponsorship is limited to Professional Employer Organizations (PEOs) and established employer groups, such as Chambers of Commerce. Mutual fund companies, banks, 401(k) recordkeepers, and insurance companies can’t sponsor MEPs.
Businesses that share a commonality, such as membership in a trade organization, can pool workers under one MEP retirement plan. Or, businesses within a state or municipality can pool resources under one plan.
The rule drew wide-ranging criticism across the financial services industry, and from some ERISA attorneys, for its narrowness and its failure to leverage existing service providers to sponsor Open MEPs, which require no business or geographic commonality. (Photo: Shutterstock)
7. E-disclosure advances, no sign of fiduciary rule.
Labor is currently reviewing comments to a proposed rule that would establish a new safe harbor for using electronic media to deliver required plan documents.
If adopted, electronic delivery can be the default method for providing documents, so long as participants can opt out if they prefer paper documents.
Sponsors have been calling for the policy for years. In 2016, Labor estimates that just under half of approximately 120 million plan participants received plan documents through the mail. Labor estimates that the new proposed safe harbor will result in $2.4 billion in savings over 10 years.
While Labor said it was aiming to propose a fiduciary rule and new prohibited transaction exemptions by the end of the year, a proposed rule has yet to be sent to the Office of Management and Budget for review, making an end-of-year deadline all but impossible to meet. (Photo: Shutterstock)
1. SEC finalizes Reg BI.
In June, the Securities and Exchange Commission finalized a package of rules that will impact investing and retirement advice.
Under Regulation Best Interest, broker-dealers in the retail market will have new obligations of disclosure, care, conflict-of-interest mitigation, and compliance.
Under the care obligation, all investment recommendations must be made in the investor’s best interest. All fees on investments will have to be disclosed. In the eleventh hour, the SEC extended the obligations to cover advice on IRA rollovers.
The dissenting vote, cast by Commissioner Robert Jackson, was representative of consumer advocates who had supported the Labor Department's fiduciary rule and were critical of Reg BI throughout the rulemaking process. Jackson argued that the best-interest standard falls short of a fiduciary standard, and will let brokers give conflicted advice, so long as it is disclosed.
Clayton hit back at critics, saying their arguments ranged from false and misleading to simple “nonsense.” (Photo: Diego M. Radzinschi/ALM
2. SEC lowers the hammer on fiduciaries.
If Chair Clayton is an industry plant doing Wall Street’s bidding—as his critics imply— a growing list of fiduciary firms around the country is not getting the memo.
Under Clayton, the SEC enlisted a share-class disclosure initiative, a program that lets registered fiduciary advisories self-report disclosure violations on 12b-1 fees and instances where higher-cost share classes were recommended instead of lower-cost shares of the same funds.
In March, the SEC settled with 79 firms, resulting in $125 million to be returned to investors. Another 17 settlements were announced in the fall. In fiscal year 2019, stand-alone cases brought against investment advisory firms, under the disclosure initiative as well as outside of it, nearly doubled from 2018.
In August, the SEC brought charges against Commonwealth Financial Network for failing to disclose $100 million in revenue-sharing to its brokerage arm. (Photo: Diego M. Radzinschi/ALM)
3. Acosta forced out at Labor.
In July, Labor Secretary Alexander Acosta resigned amid a media swarm questioning his role as U.S. Attorney for the Southern District of Florida in brokering a plea deal with Jeffery Epstein.
Acosta had replaced President Trump’s original Labor nominee, Andrew Puzder and was seen as a safe alternative to the sometimes-controversial Puzder.
In 2007, while Acosta was the top federal law enforcement official in Miami, Epstein received an 18-month work release sentence for victimizing under-age women.
In a press conference days before his resignation, Acosta defended his role intervening in state court to secure a conviction against Epstein. “I wanted to help them—we wanted to help them,” Acosta said of Epstein’s victims. “That’s why we intervened and put the world on notice that he was and is a sexual predator.” (Photo: J.Albert Diaz/ALM)
4. SECURE Act future insecure.
In May, the House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act by a 417 to 3 vote .
It was expected to sail through the Senate, and be law by now. But several holds in the Senate relating to non-retirement provisions of the bill prevented it from advancing with unanimous consent.
Then this fall, legislators attempted to attach the SECURE Act to a spending bill. But that died, as Congress failed to fully fund the government for next year, instead passing clean continuing resolutions.
Unless it's attached to a spending bill before Congress adjourns for the holidays, the SECURE Act could be reintroduced in the Senate next year and advance by regular order. That is certainly feasible. But it will be more difficult with each passing day during an election year. If it doesn’t get passed by the end of Trump’s first term, it will have to be completely reintroduced in the next Congress. (Photo: AP)
Advertisement
5. Reorg at EBSA.
The Employee Benefits Security Administration, Labor's regulation and enforcement arm that oversees around 703,000 private-sector retirement plans under ERISA, underwent a significant reorganization of its top leadership, effective October 1.
The restructuring aims to expedite the guidance and rule-making agenda of the Trump administration. Oversight of the Office of Regulations and Interpretations and the Office of Exemption and Determinations is now under the Principal Deputy Assistant Secretary, which is a politically appointed position. Rule-making and exemption responsibilities were previously overseen by a career bureaucrat.
Senior Democratic lawmakers questioned the need for the reorganization. (Photo: Mike Scarcella/ALM)
6. MEPs finalized,
The Labor Department released a final rule on Multiple Employer Plans that it says “could” offer small businesses more affordable and less burdensome retirement plans, and level the playing field for their employees by getting them access to lower-cost savings plans.
Under the rule, MEP sponsorship is limited to Professional Employer Organizations (PEOs) and established employer groups, such as Chambers of Commerce. Mutual fund companies, banks, 401(k) recordkeepers, and insurance companies can’t sponsor MEPs.
Businesses that share a commonality, such as membership in a trade organization, can pool workers under one MEP retirement plan. Or, businesses within a state or municipality can pool resources under one plan.
The rule drew wide-ranging criticism across the financial services industry, and from some ERISA attorneys, for its narrowness and its failure to leverage existing service providers to sponsor Open MEPs, which require no business or geographic commonality. (Photo: Shutterstock)
7. E-disclosure advances, no sign of fiduciary rule.
Labor is currently reviewing comments to a proposed rule that would establish a new safe harbor for using electronic media to deliver required plan documents.
If adopted, electronic delivery can be the default method for providing documents, so long as participants can opt out if they prefer paper documents.
Sponsors have been calling for the policy for years. In 2016, Labor estimates that just under half of approximately 120 million plan participants received plan documents through the mail. Labor estimates that the new proposed safe harbor will result in $2.4 billion in savings over 10 years.
While Labor said it was aiming to propose a fiduciary rule and new prohibited transaction exemptions by the end of the year, a proposed rule has yet to be sent to the Office of Management and Budget for review, making an end-of-year deadline all but impossible to meet. (Photo: Shutterstock)
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
