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401k Record Keepers React to DOL Fiduciary Rule Differently

For many 401k and 403b plan sponsors, the real question is how and when will the DOL fiduciary rule affect them. Though it will not affect them dramatically, it will alter their relationships with their record keeper and advisor. According to a survey by Aon Hewitt of 18 record keepers, it appears likely that services and even pricing may change so be careful before you sign anything and pay close attention to notices sent.

One of the biggest concerns by 401k and 403b record keepers is taking on fiduciary responsibility but the revised definition under the DOL rule is changing whether they can avoid it blurring the lines between what is considered education and advice. A DOL FAQ notes that the following activities would not be considered fiduciary advice:

  • Information about investment without a recommendation
  • General financial information
  • Hypothetical asset allocation models
  • Interactive investment education including worksheets, questionnaires and online tools

But the DOL FAQ clearly states that just suggesting a lineup could make record keepers a fiduciary if they limit their suggestions beyond the outline of the plan’s investment policy statement.

Of more concern by record keepers is their interaction with participants, especially those that are separating from service and may be considering rolling their plan assets into an IRA. Seven of the 18 record keepers polled by Aon Hewitt indicated that along with online tools, they would be providing some form of fiduciary advice while the other 11 would only be making online tools available.

Some record keepers, especially those with a retail brand that regularly market direct to investors, are eager to solicit IRA rollovers even if they must act as fiduciaries in the process. Case in point is Fidelity, one of the largest defined contribution record keepers and a prolific marketer of IRAs. Fidelity’s defined contribution plan sponsor under $50 million received an addendum to their contract with a negative option changing the relationship. Larger plans will have to make a positive decision. Those plans that decline to allow Fidelity to solicit participants as a fiduciary will get fewer services at the same price.

So plan sponsors have to play close attention to the changing relationship with record keepers and advisors especially any documents that they may be requested to sign or notices requiring action.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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