Compliance April 18, 2016
Fiduciary Rule Action Steps for Plan Sponsors
The final fiduciary rule is aimed at advisers, but plan sponsors will be affected by changing relationships with providers, communication to participants and more.
Reported by Corie Hengst
While the Department of Labor’s (DOL) final fiduciary rule is focused on advisers, plan sponsors should still be prepared for ongoing changes depending on how their advisers respond to the rule.
“The impact to plan sponsors is an evolving concept,” Leah Singleton, attorney at Alston & Bird LLP, said during a recent webinar titled “Final Fiduciary Advice Rule Adopted. What’s Next?”
Specifically, the final rule will affect relationships and contracts with plan service providers, communication to participants, costs (who gets paid and how), compliance and disclosure obligations, and fiduciary liability for engaging and monitoring advisers.
“This is going to be a very good time to evaluate who provides services to your plan and how it is impacted under these rules and how you are impacted as a plan sponsor,” Singleton says.
During the webinar, Singleton gave a rundown of the basic action items a plan sponsor should review in the wake of the final rule. To begin, plan sponsors should know whether the plan’s investment adviser is a fiduciary and they should be prepared for possible changes, whether it’s a new contract, disclosure statements or changing compensation arrangements.
Plan sponsors should also review distribution forms and other communications to plan participants to ensure they don’t provide investment advice, and they should make sure someone is identified as a fiduciary for advice solutions. Plan sponsors will need to ensure that the group education meetings offer less specific investment information, too. “You can just direct them to where they can find the answer, but don’t advise them on a particular investment,” Singleton says.
In the final rule, the DOL says plan advisers and sponsors can continue to provide general education about retirement savings without prompting fiduciary duties. It also says that investment advice “does not include communications that a reasonable person would not view as an investment recommendation, including general circulation newsletters, television, radio, and public media talk show commentary, remarks in widely attended speeches and conferences, research reports prepared for general circulation, general marketing materials, and general market data.”
“The impact to plan sponsors is an evolving concept,” Leah Singleton, attorney at Alston & Bird LLP, said during a recent webinar titled “Final Fiduciary Advice Rule Adopted. What’s Next?”
Specifically, the final rule will affect relationships and contracts with plan service providers, communication to participants, costs (who gets paid and how), compliance and disclosure obligations, and fiduciary liability for engaging and monitoring advisers.
“This is going to be a very good time to evaluate who provides services to your plan and how it is impacted under these rules and how you are impacted as a plan sponsor,” Singleton says.
During the webinar, Singleton gave a rundown of the basic action items a plan sponsor should review in the wake of the final rule. To begin, plan sponsors should know whether the plan’s investment adviser is a fiduciary and they should be prepared for possible changes, whether it’s a new contract, disclosure statements or changing compensation arrangements.
Plan sponsors should also review distribution forms and other communications to plan participants to ensure they don’t provide investment advice, and they should make sure someone is identified as a fiduciary for advice solutions. Plan sponsors will need to ensure that the group education meetings offer less specific investment information, too. “You can just direct them to where they can find the answer, but don’t advise them on a particular investment,” Singleton says.
In the final rule, the DOL says plan advisers and sponsors can continue to provide general education about retirement savings without prompting fiduciary duties. It also says that investment advice “does not include communications that a reasonable person would not view as an investment recommendation, including general circulation newsletters, television, radio, and public media talk show commentary, remarks in widely attended speeches and conferences, research reports prepared for general circulation, general marketing materials, and general market data.”