You and You and You are all Fiduciaries!

Last Updated: April 22, 2016

The Department of Labor’s (DOL’s) long-anticipated fiduciary rule has finally been released, and it will become effective (for the most part) on April 10th, 2017.  The new rule in its final form broadens the definition of “fiduciary” in order to cast a wider fiduciary net over more financial professionals in the retirement planning industry.
Under the new rule, fiduciary “investment advice” is defined as a recommendation to a plan, plan participant, or IRA owner for a fee or other compensation regarding the advisability of a transaction involving securities or investment property, including a recommendation to rollover money into an IRA.  The rule defines “recommendation” as a communication that would reasonably be viewed as a suggestion that the advice recipient take a particular course of action.  This is a very broad definition that, with the exception of several carve-outs, makes almost all investment related communications fiduciary investment advice. The implications of this broader definition of fiduciary investment advice are that many investment professionals, who were not previously fiduciaries with respect to their investment recommendations, will now have fiduciary duties.  These fiduciary duties include:
  • the duty to act prudently
  • the duty to act in the best interest of plan participants, and
  • the duty to only charge reasonable fees for necessary services
As we discussed in a blog post in February, it’s important for plan sponsors to understand their current plan service providers’ fiduciary status in order to fully determine the impact of the DOL’s new rule on their plan.  Plan sponsors should ask:

“Are our current plan service providers, such as our plan’s broker, registered investment advisor, or record keeper, providing fiduciary services to the plan?”

“Are they a 3(21) co-fiduciary on the investment selections?” 

“Are they a 3(38) fiduciary where they have taken on the responsibility of choosing the investments for the plan?“

“Or, are they acting in a non-fiduciary capacity?”

As the industry continues to digest the DOL’s rule, it’s important for plan sponsors to begin to ask service providers how they will be adapting to the changes, and how their services will be impacted.  If you have questions about your current service provider setup or ways you can keep you and your employer out of legal trouble, contact our ERISA Services Team.
PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.


Pension Consultants, Inc.



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