A Review of How the Fiduciary Rule Could Affect Retirement Plan Sponsors

The fiduciary rule has shaken up the advisory space, but plan sponsors also need to know what’s in the rule and make plans for how it could affect them.

Issuance of the final fiduciary rule, or conflict-of-interest rule, from the Department of Labor (DOL) has shaken up the advisory space, but plan sponsors are paying attention too, waiting to see how it will affect services from their providers and advisers.

Cerulli Associates anticipates advisers will increasingly choose technology platforms to deliver advice, and insurance product pricing may become more like mutual funds. Fourteen percent of retirement plan providers surveyed by SPARK Institute believe they will become an Employee Retirement Income Security Act (ERISA) fiduciary for the first time under the new regulations.

In addition, nearly two-thirds, 64%, of the nation’s top retirement plan recordkeepers and providers believe that the new DOL fiduciary rule will deter rollovers from retirement plans into individual retirement accounts (IRAs), thus helping them to retain assets, the LIMRA Secure Retirement Institute found in a survey. And one-third of financial advisers who counsel defined contribution (DC) plans already plan to make changes to mutual funds used in their clients’ DC plans in 2017, according to a study from Ignites Retirement Research.

The fiduciary rule will affect all plan types, including defined benefit (DB) plans, 403(b)s and health savings accounts (HSAs). 

Many see the fiduciary rule as a positive for plan sponsors. Experts say plan sponsors will see an expansion of fiduciary services, and sponsors and participants will be offered more information to help them make informed decisions. But, plan sponsors will likely face changes and new liabilities of their own

For example, the rule makes a change to participant education delivery

Plan sponsors should definitely know what’s in the rule, and take action to prepare for changes in provider and adviser service delivery. Actions 403(b) plan sponsors are taking include re-evaluating adviser choices, reviewing investment lineups and reviewing plan governance structure.

There have been many calls to stop the fiduciary rule, including lawsuits, a resolution introduced by lawmakers and a specific request by one U.S. Senator for the DOL to cease implementation.

However, plan sponsors should move forward with preparation, even though some think the DOL Secretary pick by president-elect Donald Trump could change the course of the rule.