Compliance

DOL Fiduciary Rule FAQ Further Clarifies Compliance Demands

In general, if a covered service provider will continue after the fiduciary rule to provide services only in a non-fiduciary capacity, or has already effectively disclosed investment advice fiduciary status, no additional disclosure would be required under the 408b(2) regulation.

By John Manganaro editors@plansponsor.com | August 04, 2017
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The U.S. Department of Labor (DOL) released a second frequently asked questions document explaining how advisers and plan providers can maintain compliance during the fiduciary rule’s lengthy implementation process.

Matters addressed in this latest FAQ include information “on (1) fiduciary status disclosure issues under the Department of Labor’s ERISA section 408(b)(2) service provider disclosure regulation that applies to ERISA pension plans; (2) whether recommendations to plan participants and individual retirement account (IRA) owners to contribute to or increase contributions to a plan or IRA constitute fiduciary investment advice under the fiduciary rule; and (3) whether recommendations to employers and other plan fiduciaries on plan design changes intended to increase plan participation and contribution rates constitute fiduciary investment advice under the fiduciary rule.”

Concerning the first question, DOL suggests that among other disclosures required under the department’s 408b(2) regulation, if a service provider under a contract or arrangement with an ERISA pension plan reasonably expects that the service provider, an affiliate or a subcontractor will provide services as a fiduciary within the meaning of ERISA section 3(21), the service provider generally has an obligation to disclose to an appropriate plan fiduciary that services will be rendered in a fiduciary capacity.

“In general, if a covered service provider will continue after the fiduciary rule to provide services only in a non-fiduciary capacity, or has already effectively disclosed investment advice fiduciary status, no additional disclosure would be required under the 408b(2) regulation,” DOL says.

The explanation continues: “In the case of a non-fiduciary service provider to an ERISA pension plan that has structured its service contract or arrangement so that it reasonably and in good faith believes that it will not be providing services to the plan that would make it an investment advice fiduciary under the fiduciary rule, the service provider would not be required to disclose investment advice fiduciary status under the 408b(2) regulation. The Department’s conclusion in this regard would not be affected by the fact that it is possible that actions of individual agents, representatives or employees involved in implementing a service contract or arrangement (e.g., call center employees) may exceed, in individual circumstances, contract limits that may result in communications that constitute investment recommendations covered by the fiduciary rule.”

The text of the FAQ document goes into significantly more depth regarding these circumstances.

NEXT: Additional clarifications

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