Will the DOL’s Proposed Fiduciary Rule Change Affect You as a Plan Sponsor?
The Department of Labor (“DOL”) has submitted their final draft of the proposed fiduciary rule to the Office of Management and Budget for final review and approval. This means that the final rule is likely to be published within the next several months.
In order to understand how the DOL’s proposed redefinition of the term “fiduciary” under ERISA will affect you as a plan sponsor, you must first understand the relationship you have with your current plan service providers.
Do any of your current plan service providers, such as your plan’s broker, registered investment adviser, or record keeper, provide fiduciary services to the plan? Are they a 3(21) co-fiduciary on the investment selection? Or are they a 3(38) fiduciary where they have taken on the responsibility of choosing the investments for the plan?
It is important to understand whether or not your current providers are acting as fiduciaries because of the higher standard of care this causes them to be held to, as well as the limiting of liability for the plan sponsor and/or their retirement plan committee.
If you find that your current service providers are not fiduciaries, the question becomes, will the new proposed fiduciary rule cause them to now be a fiduciary? To determine the potential fiduciary status of the current provider, it is important to understand the differences between the current rule and the proposed rule.
This could have the effect of changing the status of many plan advisers who are currently non-fiduciaries to fiduciaries. This could be a positive for plan sponsors, however, because the adviser will be held to the higher fiduciary standard of having to make all decisions in plan participants’ interest and they must be made in a prudent manner.As a reminder, this is a proposed rule and there is still the possibility of the rule changing before it is final. That being said, as a plan sponsor, you should use this as a reminder to look at your current service agreements and arrangements. Double check to see who is serving in the fiduciary capacity for your plan, and whether they are providing services up to the high fiduciary standard.To learn more about how this proposed DOL Fiduciary Rule change might affect you and ways you can mitigate your fiduciary risk, contact our ERISA Services Team.
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