Although a three-month extension delayed the applicability date (originally April 10), certain provisions of the Department of Labor’s fiduciary rule will be implemented on June 9, 2017. These provisions include the expanded definition of “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA), including who is considered to be a fiduciary and what constitutes a fiduciary act. Implementation of the written disclosure requirements and the full, best-interest contract exemption is scheduled for Jan. 1, 2018.
The intent of the rule is to ensure that professionals giving investment advice for retirement accounts, such as 401(k)s, individual retirement accounts (IRAs), etc., act in the best interest of the plan and plan participants. The best interest requirement means advisors will need to disclose information about the services they provide, fees and expenses, and potential conflicts of interest.
Included in this rule are limitations on recommendations related to the investment of securities after they are rolled over, transferred, or distributed from a plan to an IRA. The recommendation is considered fiduciary investment advice when there is compensation for making recommendations.
Plan sponsors should meet with existing advisors to review relationships. Obtain and review the new disclosure from your advisors, looking for any potential conflicts of interest. In particular, review compensation of vendors that involve revenue sharing, as these types of arrangements have been the center of recent lawsuits.
If you have questions about how the new rule might affect your company-sponsored retirement plan, contact a member of our employee benefits team.
Read this article from Reuters for additional information on the future of the new fiduciary rule.