At its June meeting, the PERA Board of Trustees instructed staff to submit a comment to the U.S. Department of Labor expressing support for a proposed rule that would change fiduciary standards for investment advisers.
Colorado PERA is not governed by the Employee Retirement Income Security Act of 1974 (ERISA) or the related Department of Labor regulations. But as an organization, PERA believes in strict standards for investment advisers who help individual investors achieve retirement security, whether or not those investors are also members of PERA.
The proposed rule would expand the fiduciary responsibility for people who provide investment advice or recommendations and is intended to increase consumer protections for participants, beneficiaries, and employers who offer retirement plans to their employees, as well as employee benefit plan fiduciaries and IRA owners.
Given that an increased level of responsibility for advisers could lead to better decision making by individual investors as well as employee benefit plans, the capital markets where PERA makes and holds many investments would only improve.
Furthermore, PERA believes individuals who are investing their own money in the markets should be able to access the same quality of advice as PERA’s investment professionals and trustees receive.
PERA also believes its own members will make better choices and increase their chances for a secure retirement if their advisers are fiduciaries.
As an example, at retirement or after leaving employment with a PERA-affiliated employer, account holders have the choice to either leave their money with PERA and retire with a monthly benefit or take a lump-sum distribution, plus any match for which they are eligible, and invest elsewhere.
PERA frequently receives reports from members that financial advisers recommend leaving behind the security of a monthly benefit from PERA and moving their significant retirement savings to other investments – often sold by a broker/dealer. While this may be the best decision for some participants, that advice should be subject to the fiduciary standard that it is in the best interest of an adviser’s client, not simply the broker/dealer’s suitability standard.
In its comment letter, PERA urged the Department of Labor to “adopt the proposed rules that require a fiduciary level of advice by investment advisers.”
A public hearing is being held on the proposed rule in mid-August.
FiduciaryA person who manages money on someone else’s behalf and who has a sworn responsibility to manage those funds in the best interest of the client.
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