Participants and beneficiaries of retirement plans in Chicago and the rest of Illinois will soon have opportunity to review the testimony presented to the Department of Labor ("DOL") regarding the DOL's proposed new definition of a plan "fiduciary" and submit comments on that testimony. The DOL announced the extension on March 8, 2011 in a press release. Once the DOL uploads the testimony to the site of its agency, the Employee Benefit Security Administration ("EBSA"), the testimony will be available for review for 15 days.
Prior to holding the hearings on March 1-2, 2011, the DOL received an abnormally high number of public comments regarding its proposed regulation, 199 to be exact. It further received 39 written requests to testify at the hearing.
Times have changed. The DOL's proposed new definition of fiduciary would modernize the 35 year-old definition that may have been appropriate in the 1970s, but has proven to be outdated today. The retirement plan industry has experienced a mass exodus from traditional defined benefit pension plans and gravitated towards defined contribution plans, such as a § 401(k) plan (where the account balance defines the amount of benefits the participant will receive). In addition, there are far more outsourced service providers to plans today than there were 35 years ago. These service providers' fees are often paid from the account balances of the very participants to whom the providers wish to owe no fiduciary duty.
In the 1970s landscape of defined benefit pension plans, the service providers' loyalty understandably may have been to the plan sponsors and employers, because a misfeasance by the service provider likely resulted in the employer paying more to fund the promised benefits. But today, the participants often directly pay for these services, thus lowering the participants' and beneficiaries' benefits. Should there not then be a higher duty of cared owed by service providers to participants and beneficiaries today than there was 35 years ago?
For more information regarding the proposed new definition, see DOL Issues Agenda for Hearing on Proposed Regulation Changing the Definition of "Fiduciary".