Hearing amplifies CUNA concerns about DOL fiduciary plan

September 22, 2015

WASHINGTON (9/22/15)--Many concerns CUNA raised with the U.S. Department of Labor (DOL) over that agency's proposed fiduciary definition regulation were echoed by other organizations at a four-day hearing earlier this month. In a second comment letter on the proposal sent Monday, CUNA urged the DOL to further study how credit unions and other financial institutions will be affected, and to consider reissuing a more narrowly tailored proposal.

The DOL’s proposal would define who is a “fiduciary” of an employee benefit plan, and would expand what is considered investment advice, which would be triggered if credit unions provide services to a third party for 401(k) plans and IRAs.

In its first letter on the matter, CUNA noted that the DOL’s proposed revision to revise the definition of “fiduciary” was too broad, and could lead to increased regulatory burdens for credit unions. CUNA urged the agency to more narrowly tailor what it considers “investment advice.”

CUNA also wrote to Congress earlier this month asking legislators to consider the impact the proposal would have on credit unions.

The hearing allowed stakeholders to offer additional commentary on the rule, and the DOL provided additional time for the public to submit comments. At the hearing, organizations representing financial institutions raised similar questions about how the proposal could affect consumers.

In its second letter, CUNA pointed out that many speakers at the hearing raised the same points, and again pushed the agency to engage in additional analysis about the proposal’s impact on the ability of working-class families to participate in retirement savings plans.

“As participants at the hearing noted, the rule in its current form is overly complicated, and will likely have the effect of limiting opportunities for education about retirement and savings plans,” CUNA’s letter reads.

Credit unions offering investment advice often have arrangements with third party brokers that clearly outline the duties and responsibilities of each party.

“Since the rule has such a broad scope, we have concerns that credit unions could be swept into some of the newly proposed requirements,” the letter reads. “This is concerning because the compliance burdens for those who will qualify as ERISA fiduciaries are significant, and small or medium size credit unions could be hesitant to engage in any activity that may require compliance with this complex and expansive proposed rule. This could preclude credit unions from offering investment services through a third party.”

 Participants at the hearing and other commenters, including other regulators, also shared CUNA’s concerns about the regulatory overlap that is likely to occur if the current version of the rule is finalized. Credit unions are already supervised by the National Credit Union Administration and the Consumer Financial Protection Bureau, and this proposal could add oversight from additional agencies.