/DOL Provides Conflict of Interest FAQs Around Fiduciary Rule

DOL Provides Conflict of Interest FAQs Around Fiduciary Rule

WHAT HAPPENED?

On August 3, 2017, the DOL released a conflict of interest FAQs to provide additional clarification around the Fiduciary Rule. In the FAQ, the DOL provides guidance regarding:

  1. Fiduciary status disclosures that must be provided by ERISA pension plan service providers that serve in a fiduciary capacity;
  2. Whether recommendations made to plan participants and IRA owners to increase contribution levels constitute advice under the Fiduciary Rule; and
  3. Whether recommendations for plan design changes intended to increase plan participation constitute fiduciary investment advice.

FAQ #1

One major concern among fiduciary service providers has been the confusion around the need to claim fiduciary status. While the 408b-2 regulation requires covered fiduciary service providers to state their role as a fiduciary, provisions under the BIC and Principal Transactions Exemption have been delayed until January 1, 2018 (the “transition period”). The DOL provided additional guidance in the most recent FAQ regarding required disclosures during the transition period.

Covered service providers, affiliates and subcontractors in an arrangement with an ERISA pension plan are reasonably expected to disclose all services that they will provide in a fiduciary capacity to the appropriate plan fiduciary. If the covered service provider will provide services in a nonfiduciary capacity or has previously disclosed its fiduciary status, then they are not required under the 408b-2 regulation to provide additional disclosure.

Although the initial deadline to disclose the change of status was within 60 days of June 9, 2017, the DOL stated that the failure to provide notification containing the term “fiduciary” WOULD NOT violate the 408b-2 requirements so long as the service provider furnished a complete description of all services performed for the plan in its contract. This exception will be applicable up until the end of the transition period.

FAQ #2

The DOL has expressed that communications concerning the benefits of plan or IRA participation and the recommendation to increase contribution amounts DOES NOT qualify as fiduciary investment advice under the Fiduciary Rule. This recommendation IS CONSIDERED fiduciary investment advice if it promotes certain investment products or investment management of a particular security or investment property. Please refer directly to the DOL’s FAQs for specific examples.

FAQ #3

Similar to the DOL’s response to FAQ #2, recommendations to plan administrators or related plan fiduciaries on methods to increase employees’ participation in an ERISA plan DOES NOT qualify as fiduciary investment advice under the Fiduciary Rule. This recommendation IS CONSIDERED fiduciary investment advice if it promotes specific investment products or investment management of a certain security or other investment property.

WHAT DOES THIS MEAN FOR ME?

The DOL will likely provide additional guidance during this transition period leading up to January 1, 2018. Fairview will continue to update clients with any new information that the DOL releases regarding the Fiduciary Rule and its implementation.

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