The United States Department of Labor (“DoL”) recently released the latest round of Frequently Asked Questions for the Department’s new Fiduciary Rule. Containing only three sets of questions and answers, the release clarifies issues relating to 408(b)(2) defined contribution plans and other retirement plan advisors. Click here to read the DOL’s August FAQs.
With regard to defined contribution plans, the DoL has indicated that it is taking a lenient view toward the disclosure deadline found in 408(b)(2). That disclosure requirement would have required service providers to identify themselves as fiduciaries in disclosures to clients. Some defined contribution plan service providers have expressed concern that making the disclosure during the transition period will confuse clients or cause difficulty if the DOL rule is ultimately changed. The first phase of the Fiduciary Rule went into effect on June 9, 2017 requiring investment advisors to comply with the Impartial Conduct Standard. The second phase is set to go into effect January 1, 2018, but some believe this phase may be delayed as well. Given these industry concerns, the FAQs indicate that the DoL will consider the 408(b)(2) disclosure requirement satisfied if the service provider instead delivers “an accurate and complete description of the services” it will provide.
The second question in the FAQ addresses whether it would be considered fiduciary advice for a plan or service provider to encourage participants to make additional contributions to the plan. According to the DoL, so long as the communications do not include recommendations about specific investments, encouraging participants to take part in a savings plan or IRA will not be considered fiduciary advice.
The DoL addresses a similar issue in the final FAQ. There, the question is whether suggestions made to a plan administrator or other plan fiduciary regarding ways to increase participation or contributions to an ERISA plan constitutes fiduciary advice. Again, so long as the communications do not recommend specific investment products, securities, or investment property, the DoL will not consider such communications to be fiduciary advice.
For our current clients, RIA Compliance Consultants is available for a consultation about what your investment advisor can do to prepare for the implementation of the DoL fiduciary rule. Please contact your compliance consultant.
For prospective clients, RIA Compliance Consultant is able to include a consultation about the implementation of the DoL fiduciary rule as part of our annual compliance program service. New clients can click here to schedule an introductory call to learn more about our annual compliance program services.
Posted by Grant Parr