Lawmakers and retirement experts are urging the Department of Labor to create a new exemption under its proposed plan to amend the definition of fiduciary on retirement accounts so that plan advisors won't be prohibited from helping participants with rollovers.
In testimony Wednesday during DOL's third day of hearings on its fiduciary redraft, Marcy Supovitz, a principal of Boulay Donnelly & Supovitz Consulting Group, Inc. in Worcester, Massachusetts, who testified on behalf of the American Retirement Association, said that the proposed rule's Best Interest Contract Exemption (BICE) will discourage plan advisors from working with participants on rollovers, even in situations where the advisor is receiving level compensation on both sides of the transaction.
Meanwhile, Labor Secretary Thomas Perez told Rep. Ann Wagner, R-Mo., a defiant opponent of DOL's fiduciary rulemaking, in an Aug. 7 letter that DOL will consider the issues raised during the hearings taking place this week and "move forward towards issuing a final rule that balances the input we have received."
Supovitz told DOL officials during the Wednesday hearing at its headquarters in Washington that as currently written, "it isn't clear that the BICE is available for rollover transactions, but assuming it is, it still would not be available for this rollover transaction because the BICE doesn't extend to discretionary investment management,"
The BICE, she continued, "is specifically designed for differential compensation. When compensation is level and investment-neutral, it doesn't make sense to impose all of the BICE requirements. That will discourage trusted plan advisors, who have been vetted by the plan sponsor, from serving participants after retirement."
Supovitz suggested creating a separate, streamlined exemption to BICE known as the "level-to-level compensation exemption."