Jamie Ann Hayes, QPFC, C(k)P, AIF(r)

Jamie Ann Hayes, QPFC, C(k)P, AIF(r), Partner and Consultant of FiduciaryFirst, specializes in Employer Retirement Plan Fiduciary Services and Corporate Pension Consulting.

The DOL’s New Rule: 10 Things Employers Need to Know

Since June 9, 2017, the United States Department of Labor (DOL) rule for prudential management of employer participant retirement plans, has provided several important obligatory changes to the retirement plan sponsor practice. The DOL’s Fiduciary Rule or “Best Interests Rule created a new standard of professional care for brokers.

Once more common for a Registered Investment Advisor (RIA) practice, the Fiduciary Rule now extends to all brokers and agents that work with employer retirement accounts. Duties of RIAs have customarily been a fiduciary standard, without the inclusion of investment advisors (i.e. agents and brokers). With the enactment of the 2017 Fiduciary Rule, all financial agents, including insurance brokers and investment advisors, who are paid commissions on sales must abide by the DOL rules laid forth for fiduciary practice. The rule is intended to protect retirement plan sponsors and plan members by negating issues of conflicted compensation, and enforces fiduciaries to uphold an ethical responsibility to objective professional opinions when advising clients.

While the Fiduciary Rule does not go into full effect until January 1, 2018, implementation of fiduciary guidelines by retirement plan sponsors is already underway. The intent is to make new fiduciaries fully aware of their responsibilities under the new laws, as well as changes to current practices. The following are the 10 things clients should know about the rule change:

  1. Make a record of plan administrators and advisors impacted by the fiduciary rule reform implementation. Investment advisors fall under this category, yet financial professionals providing “education” may not.

  2. If financial professionals are identified to be Brokers or RIAs (Registered Investment Advisors), they must uphold the fiduciary standard in line with their designated status. Exceptions for certain compensation arrangements/financial conflicts of interest are made in Best Interest Contract Exemption (BICE). BICE is typically accorded to brokers that provide advice on distribution recommendations and participant accounts. The best interest standards of the fiduciary rule still apply.

  3. Fiduciaries should be compliant with the new rule and effective implementation date to uphold legally binding plan agreement terms and conditions. Failure to do so is a violation.

  4. Compliance is a matter of prudential obligation, and mandates that plan sponsors assure that all brokers and other vendors involved in plan contract are also compliant.

  5. Brokers conducting "prohibited transactions" are at odds where the commission is concerned, and must elect to reform practice by one of the following options: 1) RIA registration and level fee assignment; 2) BICE; 3) work with a 3(38) fiduciary.  BICE must disclose all conflicts of interest and commissions in a web page publication.

  6. Internal HR procedures involving employee retirement plans should be designed to meet DOL Fiduciary Rule criteria when HR personnel is communicating with plan participants.

  7. All retirement education materials published by the plan sponsor must be consistent with the parameters of the rule.”

  8. Retirement plan rollover procedures are central to the new fiduciary policy. A primary objective of the rule is to protect 401(k) investors from conflicted advice about rollover to Individual Retirement Accounts.

  9. Target date ranges of fund rollovers may impact a number of potential conflicts with new fiduciary rule implementations. As a plan sponsor, you should attempt to coordinate rollover obligations with rule implementation.

  10. Retirement plan sponsors managing Health Savings Accounts (HSA) are now subject to the new fiduciary rule which means employees should be apprised of these changes when a Human Resource department communicates about HSA plans.

FiduciaryFirst’s comprehensive Prudent Fiduciary ProcessSM (PFP) addresses the guidelines to the DOL’s new Fiduciary Rule. Prepare your organization for the changing regulatory environment. For more information about retirement plan sponsorpractice changes and recent legislative reforms to investment fiduciaries, contact us at 866-625-4611 or visit www.fiduciaryfirst.com.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Tracking Number: 1-651996

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