Department of Labor Delays Action on Proposed Regulation on Definition of a Fiduciary; Congressional Push Against DOL Proposal

Leading up to the Las Vegas Conference and Trade Show, November 3 – 4, 2011, we’ll be posting government affairs information that will be discussed at the Conference. Today, an update on the DOL’s proposed regulation on the definition of a fiduciary.

Since late October 2010, The ESOP Association, and the ESOP community, has protest­ed vigorously against the Department of Labor’s (DOL) proposed regulation to make all appraisers of private ESOP company stock ERISA fiduciaries. On September 19, 2011, the DOL issued a press release announcing it would issue a new version of the regula­tion revising the definition of ERISA fiduciaries in January 2012, and begin the com­ment period, in essence, all over again. You can read the DOL press release here.

The DOL press release hints at leaving in the provision making ESOP appraisers ERISA fiduciaries when they value stock being acquired by a private company. In the opinion of The ESOP Association and many others, such an outcome would dry up ESOP transactions, the number of ESOPs would dwindle, the community’s voice in D.C. would be weaker, and ESOP benefits would be devastated. ESOP advocates were encouraged to continue to bring concerns about this proposed regulation to the atten­tion of members of Congress.

Then, on September 29, 2011, the Chair of the House Committee on Appropriations’ Subcommittee on Labor, Health and Human Services, Education, and Related Services, Congressman Denny Rehberg [R-MT], introduced a DOL appropriations bill for Fiscal Year 2012, among other Federal agencies, which contains the following provision:

“Section 109. None of the funds made available by this Act may be used to pro­mulgate or implement a final rule amending…the definition of the term ‘fiducia­ry’…including the proposed rulemaking published by the…Department of Labor on October 22, 2010…”

The reference is to the DOL’s proposed rule. Introduction of this bill does not mean the DOL proposal will go away, because a proposed bill is not necessarily going to be on the President’s desk for signing into law. Use this link for more information about H.R. 3070, the House appropriations bill for DOL funding.

We thank Congressman Rehberg for standing up to the DOL. We know his proposal was motivated by concerns over the proposed rule’s impact on k plans and IRAs as well as ESOPs. But his action, just as Senator Kelly Ayotte’s [R-NH] introduction of S. 1232 in June of this year, is a strong signal to DOL and its officials that they, when re-proposing the October 22, 2010 regulation, should not come close to what was in the original pro­posal. In fact, Congressman Rehberg’s proposal in this appropriations bill for FY 2012 is a pretty strong signal to DOL to just walk away from its original proposal 100%.

The ESOP Association will keep you posted on this regulatory proposal, and other efforts to stop the DOL from mandating that appraisers of private ESOP company stock be ERISA fiduciaries with bulletins, postings on its blog, Facebook page, and LinkedIn group.

Contact if you have questions or stop by the Conference and Trade Show registration desk and ask for ESOP Association President, J. Michael Keeling.

NOTE: Mr. Keeling will be giving a legislative update at the Conference and Trade Show at the Friday, November 4th luncheon. Check your app schedule for time and location.

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