WASHINGTON–CUNA has cautioned the Department of Labor that its new proposal could put a “chill” into the ability of CUs and other financial institutions to offer retirement products.
In a comment letter, CUNA said that the DoL’s proposed regulation defining who is a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA), which includes adding brokers and advisers providing advice to individual retirement accounts to the definition.
“We agree with the DOL that credit union members, and all consumers, deserve the best possible service when seeking information about retirement plans or Individual Retirement Account (IRA) distributions,” said CUNA in its letter. “However, it is important to have rules that encourage and promote retirement savings – rather than potentially chill the ability of credit unions, or other financial institutions, to provide these products and services. CUNA believes that it is necessary for the DOL to analyze how it can more narrowly tailor the definition of ‘investment advice’ to assure that credit union employees, who are only tangentially involved in providing investment services, are not included in the rule. Furthermore, CUNA urges the DOL to further consider how the barriers created by creating strict rules in this area could negatively impact consumers’ access to retirement and other investment services, particularly for lower net-worth credit union members who may have fewer opportunities to participate in retirement and savings plans.”
Under the proposed rule, a person receiving compensation for advice that is individualized or specifically directed at a particular plan sponsor, plan participant, or IRA owner for consideration in making retirement investment decisions would be considered a fiduciary, unless they meet one of the specified carve-outs.
CUNA noted that for a majority of credit unions offering brokerage services, compliance with this DOL proposal will not sit at the credit union level because many credit unions offering these services have arrangements with third-party brokers that clearly outline the duties and responsibilities of each party in the arrangement.
“The third party offering retirement or IRA services in most situations will be responsible for their own compliance with applicable laws and compliance standards, and is usually selling their products directly to members,” CUNA said. “Usually, credit union employees who interface between credit union members and the third party are only involved in the dealings in a minor way.”
The full letter, from CUNA Senior Director of Advocacy and Counsel Leah Dempsey, can be found in CUToday.info’s free Open Vault.