Three of the financial industry's largest trade associations shared broad support for the Department of Labor's proposed rule on fiduciary duties in selecting retirement plan investments, while suggesting targeted changes are still needed to deliver its stated goals of retirement security and fiduciary clarity.
Following a principles-based approach, the proposed rule published in March outlines factors for defined contribution plan fiduciaries to show they've fulfilled their duty of prudence under the Employee Retirement Income Security Act when selecting investment options.
The proposed rule is asset-neutral, outlining a process-driven framework for fiduciaries that, if followed, provides safe harbor protection through a presumption of prudence.
On Monday, the Insured Retirement Institute, the Securities Industry and Financial Markets Association and its asset management group, and the Managed Funds Association each filed letters expressing general support, while still urging the DOL to refine the rule before it is finalized.
IRI, the Washington, D.C.-based trade group claiming to represent approximately 90 percent of annuity assets in the U.S., noted that annuities remain conspicuously absent from the DOL's proposed framework.
"With defined contribution plans now the primary retirement vehicle for workers, fiduciaries should have clear guidance that supports prudent consideration of annuities and other lifetime income solutions designed to help retirees achieve a financially secure and dignified retirement," said Emily Micale, director of Federal Regulatory Affairs at IRI.
IRI urged DOL to clarify that annuities and other lifetime income products – including guaranteed income products and longevity-protection vehicles – may be considered as designated investment alternatives, as components of designated investment alternatives, or as part of default plan pathways such as target-date strategies and qualified default investment alternatives.
It added that fiduciaries evaluating lifetime income products should be permitted to weigh factors such as guaranteed income, longevity protection, and income stability, rather than being confined to traditional accumulation-focused measures like expense ratios, short-term performance records, or daily liquidity features used to evaluate accumulation-only investments.
"A final rule that appropriately recognizes those differences would advance an important retirement security objective without compromising ERISA's core fiduciary standards," IRI said.
SIFMA and SIFMA AMG's joint letter supported the proposal's asset-neutral, process-based approach, though they suggested changes to make the proposal more workable while reducing what they saw as frivolous litigation.
"The proposal reflects ERISA's fundamental principles by emphasizing the importance of a prudent fiduciary process ... while preserving broad discretion for plan fiduciaries to determine which options best serve the interests of their plans and participants," SIFMA wrote.
Among its recommendations, SIFMA called for stronger fiduciary discretion within the safe harbor, specifically by giving them latitude to determine which evaluation factors are relevant to their specific plan design. It also recommended harmonizing the proposal's conflict-of-interest language with existing standards set by the Securities and Exchange Commission.
SIFMA also called for equal treatment of collective investment trusts alongside mutual funds among examples included in the safe harbor proposal.
The group further urged DOL to modernize Class Exemption PTE 77-4, a decades-old prohibited transaction exemption that currently applies only to open-end mutual funds, to reflect the broader range of investment vehicles now available to retirement plans.
SIFMA also echoed a widely cited concern about private markets, noting how those sectors have become an important driver of growth and innovation as more companies staying private for longer.
On that front, the SEC led by Commissioner Paul Atkins has been hard at work to reduce the burden associated with public listings, floating policies such as a lighter semiannual reporting requirement and a walkback of climate disclosure rules that were introduced in 2024 under Gary Gensler.
Meanwhile, the Managed Funds Association, which represents hedge funds and other alternative investment managers, suggested targeted refinements to lower barriers to private-market strategies in 401(k) plans.
"American workers deserve access to the same types of investment strategies that pensions and other institutional investors have benefited from for decades," said Bryan Corbett, MFA president and CEO. "Research shows diversified portfolios that include alternative assets can improve long-term returns and reduce risk."
The group urged the Labor Department to clarify that the examples in its proposed rules are illustrative guides, rather than being hard and fast rules for fiduciaries to meet safe harbor requirements.
It also called for clearer safe harbor mechanics, spelling out that fiduciaries who went through the steps for evaluating plan options will have satisfied their safe harbor requirements.
The group further urged DOL to recognize that investment products already governed by the Investment Company Act and ERISA are subject to comprehensive regulatory regimes addressing valuation, liquidity, and complexity – making additional analytical requirements duplicative and potentially counterproductive.
"Finally, the Proposal should avoid suggesting that fiduciaries may evaluate certain produces – such as those offering alternative asset exposure – only by comparison to existing options already included in a plan," the MFA letter stated.
"Instead, the rule should make clear that fiduciaries may evaluate investment alternatives on their own merits, including based on whether the product is expected to improve risk-adjusted returns, enhance diversification, or otherwise advance plan objectives," it said.
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