Regulatory and Legal DC Issues for 2013

March 6, 2013 ( - A group of attorneys discussed the regulatory and legal issues defined contribution (DC) plan sponsors should keep in mind for 2013.  

By PLANSPONSOR staff | March 06, 2013
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An expanded definition of fiduciary, restrictions on rollover IRAs, 408(b)(2) fee audits, tax reform and retirement readiness are DC retirement plan issues that will dominate discussions in Washington in the coming year. 

“At the core of the new [fiduciary] rule is DOL’s concerns about conflicts of interest in ERISA [Employee Retirement Income Security Act],” said Marcia S. Wagner, managing director of The Wagner Law Group, at the National Association of Plan Advisers/American Society of Pension Professionals and Actuaries (NAPA/ASPPA) 401(k) Summit. “DOL’s first proposal was to eliminate the five-part ERISA test and make even casual advice a fiduciary. This has been scrapped—but DOL still wants to expand the definition. If an adviser would have substantial consideration [over a plan], DOL says, they are a fiduciary.”

Wagner expects that, to avoid being held up to the forthcoming fiduciary standards, which the Department of Labor (DOL) is likely to introduce in June or July, an adviser or service provider will have to expressly “exempt themselves by making a disclaimer.”

One benefit of the new fiduciary rule that industry experts are hoping for is a clearer definition of education versus advice, and the easing of prohibited fiduciary transactions for broker/dealers, said David Levine, a principal with Groom Law Group.  

Fred Reish, a partner in the Employee Benefits & Executive Compensation Practice Group at Drinker, Biddle & Reath, does not expect DOL will “change the definition of fiduciary too much,” although it will render “most all 401(k) advisers fiduciaries. For third-party administrators (TPAs), life will be as usual. Recordkeepers will survive by and large; they have the legal staff to support them. Registered investment advisers (RIA) will want a stronger definition of fiduciary. Broker/dealers and insurance brokers? They will consider it too much.”  

Rather than having to disclose to sponsor and participant clients that they are not a fiduciary, Reish expects “Broker/dealers will create more RIA programs.” Among broker/dealers, “There will also be a levelized compensation,” Reish said.