Proposed Regulation under the Employee Retirement Income Security Act of 1974 (SIFMA and SIFMA AMG)


SIFMA and SIFMA AMG provided comments to the Department of Labor (DOL) regarding their proposed regulation under the Employee Retirement Income Security Act of 1974, as amended that would redefine the term “fiduciary” under section 3(21) of ERISA and section 4975(e) of the Internal Revenue Code of 1986, as amended as well as comments on the proposed amendments to PTE 77-4, PTE 80- 83, PTE 83-1, PTE 84-24, PTE 86-128 and PTE 2020-02.


Submitted To


Submitted By







January 2, 2024

Assistant Secretary Gomez
Employee Benefits Security Administration
US Department of Labor
200 Constitution Ave., NW
Washington, DC 20210

Re: RIN 1210-AC02, Application No. D-12057, and Application No. D-12060, Application No. D- 12094

Dear Secretary Gomez,

SIFMA1 and SIFMA AMG2 appreciate the opportunity to provide comments regarding the Department of Labor’s (“Department”) proposed regulation under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that would redefine the term “fiduciary” under section 3(21) of ERISA and section 4975(e) of the Internal Revenue Code of 1986, as amended (the “Code”) as well as comments on the proposed amendments to PTE 77-4, PTE 80-83, PTE 83-1, PTE 84-24, PTE 86-128 and PTE 2020-02. While we appreciate the opportunity to provide these comments to the Department as it assesses the impact of the proposal on retirement investors, we believe that this proposal is not tailored appropriately to address the Department’s stated goals and we urge the Department to withdraw its proposal. Moreover, the required cost analysis is incomplete and flawed, and the scope of these proposals is inconsistent with the decision of the Fifth Circuit Court of Appeals in Chamber of Commerce of United States of America v. United States Department of Labor, 885 F.3d 360 (5th Cir. 2018) (“Chamber of Commerce”).3

This comment letter will take each of these pieces of the regulatory package in turn, as well as specifically address the Department’s cost analysis.

Executive Summary

We urge the Department to abandon its latest attempt to amend its definition of fiduciary regulation defining investment advice fiduciary, as well as the accompanying prohibited transaction exemption (“PTE”) amendment changes. This version will not survive judicial scrutiny. Virtually the entire proposal is inconsistent with the Fifth Circuit’s decision in Chamber of Commerce,4 including the various new exemption changes, which are overly prescriptive and unnecessary. Moreover, the Department’s inadequate comment period, truncated and interrupted by a hearing and multiple holidays (both federal and state, as well as days of religious observances), adversely and unfairly affects this rulemaking.

This proposal includes an overly broad new definition of fiduciary, with overly narrow exemptive relief. It is clear from this proposal that the Department intends to turn many ordinary communications between individuals into ERISA fiduciary conversations. Then, once the Department makes these conversations ERISA fiduciary conversations, individuals will only be able to receive relief by fitting within PTE 2020-02. The Department is using a one-size-fits-all approach which was never the intent of Congress when providing the Department with the ability to issue exemptions. Even more troubling, the Department’s herding of financial institutions and transactions into a single, highly prescriptive exemption is plainly an improper attempt to regulate both plans and IRAs using its deregulatory authority to issue exemptions from the prohibited transaction provisions of ERISA and the Tax Code—just like it did with the 2016 package.5

Among other problems with this proposal is a new definition of investment advice fiduciary that is inconsistent with the common law definition of fiduciary and contrary to the Fifth Circuit Court of Appeals decision in Chamber of Commerce. The proposal designates a huge variety of conversations as fiduciary, including information about distributions, market information, and well established settlor information.

The Department has provided no competent evidence that the proposal is necessary. We have spent the past thirteen years working with regulators to improve the standard of care that individual investors receive. Since the Department first undertook this project, we now have the SEC’s Regulation Best Interest, the Department’s PTE 2020-02, and the NAIC’s best interest standard. Our member firms have made substantial changes to implement Regulation Best Interest, and many firms have instituted further changes to their practices to comply with PTE 2020-02. Flexibility in practices and firm arrangements provide individual investors with substantial choice in the marketplace, while still getting the benefit of financial professional looking out for their best interest.

It is especially frustrating that the Department is making changes to its own exemption that has not even been effective for two years. Firms that chose to use PTE 2020-02 made changes to their business practices to make this exemption work, but now the Department is making further changes without having undertaken any study or analysis of the impact of making such changes.6 The Department provides no evidence that the current exemption is not working. It also makes no claim that it has empirical evidence of the need for these proposed amendments.

Some of the changes, especially those that may amount to a written contractual undertaking on the standard of care, present the same issues that the now vacated Best Interest Contract Exemption (“the BIC Exemption”) presented, and not only exceed the Department’s authority under Chamber of Commerce7, but are likely to invalidate the newest changes to the exemption, making adoption of the exemption by the industry seem an unwise waste of resources in the face of a likely court determination that the proposed amendments are beyond the Department’s authority.

We urge the Department not to finalize these amendments. In the few years that the exemption has been in use, our members that are using the exemption have found it to be workable. While our members have some reservations about certain of the conditions of the existing PTE 2020-02, all of which we raised during the comment period in 2020, other members have been able to use the exemption.

We believe that retirement investors are well protected under the current exemption. For those advisory firms that are already using PTE 2020-02, the Department has not analyzed the cost to retirement investors if these amendments prove so difficult to operationalize that they offer only advisory fee accounts using a fee schedule based on a percentage of assets under advice. Indeed, it appears that the Department has neither estimated the benefits of the changes or accurately and completely analyzed the costs of compliance, and the cost to retirement investors if financial institutions using the exemption abandon it and change their service model.

SIFMA urges the Department to retain the current version of PTE 2020-02. The proposed changes will increase costs retirement investors with no discernable benefit.8

We disagree as well with the changes to the other exemptions in this regulatory package. Those proposed changes highlight a fundamental problem with the proposal: the Department’s one-size-fits-all approach is designed to claim regulatory power for the Department that Congress did not grant it.

Recent regulatory history is unfortunate: flawed regulation, massive industry investment in changing advice structures and/or terminating client relationships, only to have a court correctly overturn the rule, resulting in another expensive regulatory failure. This is avoidable: the Department’s stated rationale for this project was largely to address a reasonable method of compliance for independent insurance agents to avoid “regulatory arbitrage”. They could have worked on a narrow solution. Instead, they have put together a proposal that will raise costs, limit options and provide no benefit to investors saving for retirement.


1 The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit www.sifma.org.

2 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.

3 A copy of the Court’s decision is appended as Appendix II to this comment as an integral part of the comment. The decision’s criticisms of the Department’s statutory interpretation, and of the Department’s misuse of the authorities it does possess, are incorporated by reference.

4 Chamber of Commerce, 885 F.3d 360.

5 We note that the Department refers to the whole proposed package as a proposed regulation.

6 See Cost Analysis at Attachment I.

7 Chamber of Commerce, 885 F.3d 360.

8 See Cost Analysis at Attachment I. In Michigan v. EPA, 135 S. Ct. 2699 (2015), the Court reviewed an EPA rule, noting that: In accordance with Executive Order, the Agency issued a “Regulatory Impact Analysis” alongside its regulation. This analysis estimated that the regulation would force power plants to bear costs of $9.6 billion per