401(k): DOL ISSUES FINAL FIDUCIARY RULE
On April 8, 2016, the U. S. Department of Labor released long-awaited final regulations that implement significant changes to the definition of “fiduciary” for brokers and investors in connection with ERISA-covered plans. Generally effective as of April 2017 with certain other effective dates and subject to specific exemptions, all financial investors who provide investment advice in connection with ERISA-covered retirement benefit plans will be considered to be ERISA fiduciaries. The new rules were issued in proposed form on April 14, 2015 and have been considerably revised in response to over 3,000 comment letters and other input from the industry sent to the DOL since the release of the proposed rules.
The final regulations generally provide that a broker or other person who handles retirement plan assets must always act in the best interests of plan participants and beneficiaries, even if this could result in some loss of income for the fiduciary. The rule generally does not apply to other, non-ERISA investments (for example, regular brokerage accounts). However, registered investment advisors under the SEC or a state securities regulator must act in the best interests of investors, regardless of which type of funds they are invested in.
A Fact Sheet released in advance of the new rule’s publication indicates that the DOL streamlined and simplified the rules in an effort to minimize compliance burdens and to ensure ongoing access to investment advice, while still maintaining an enforceable “best interest standard” that protects savers. The Fact Sheet provides a general overview of the requirements and the major changes included in the final regulations.
The regulations themselves are hundreds of pages in length and are currently being scoured by the banking industry and employee benefits professionals alike to determine the scope of the new rules that will that apply to them. Once we have had a chance to investigate the new rules in greater detail, we will provide further guidance, and update pertinent information included in Compliancedashboard, accordingly.
