DOL Checklist For Plan Sponsors

The DOL Fiduciary rule has dominated headlines and boardroom discussions in 2016. And while controversy and disagreement still permeate the retirement industry landscape, the industry is also rapidly hurtling towards the implementation deadline on April 10, 2017. A checklist for plan sponsors reveals that there is still a significant burden to be borne by plan sponsors under the new rule.

Still a half year away, it’s a relatively short period of time for plan sponsors to align themselves with the new regulations. Even though the burden of compliance falls more heavily upon those who market investment products, plan sponsors also have a prescribed checklist of compliance issues to consider and implement prior to April 10, 2017.

A recent whitepaper authored by the law firm, Sutherland Asbill & Brennan LLP have compiled a checklist for plan sponsors to consider as the DOL Rule deadline approaches. This checklist for plan sponsors includes seven areas of concentration. The checklist for plan sponsors covers the general areas of:

• Internal personnel
• Plan educational materials and other communications, and
• Vendor compliance and disclosure agreements

 

Personnel Related Issues

ITEM #1
To the extent that current employment arrangements for employees providing investment advice do not meet the prescribed conditions, the arrangements generally should be conformed before the applicability date (April 10, 2017).

This topic covers the issue of which (if any) plan sponsor employees will be (or could be) deemed fiduciaries, in addition to “named fiduciaries”. And while many employees whose responsibilities provide support for investment committees and other named fiduciaries are not considered fiduciaries; this exemption can be preserved to a large extent, subject to certain conditions as follows:

• In-house treasury or investment staffs who provide investment “recommendations” (which, under the final regulation, is the core concept for identifying investment advice fiduciaries) to the plan investment committee may not receive any compensation for their advice beyond their normal compensation from the employer. ƒ
• For a human resources employee who provides advice to plan participants about investments or distributions, providing investment advice or recommendations must not be part of the employee’s job description, the employee must not be licensed or registered under insurance or securities laws (and the advice must not require such a license or registration), and the employee must not receive any direct or indirect fee or other compensation for the advice other than normal compensation from the employer.

Investment Education and other Communications

Item#2
Before the applicability date, investment education materials, rollover and distribution forms, call center scripts, human resources procedures and related processes should be refined to reflect the modified rules

Item #3
Plan recordkeepers and other service providers may become more circumspect in their interactions with participants about investment and distribution matters, in order to avoid fiduciary concerns. Plan sponsors should coordinate with their service providers, identify any new gaps in the information and services available for participants, and consider ways to close any such gap.

Item #4
Develop a procedure, or modify existing procedures, for ongoing monitoring of plan service providers and the information they are providing to participants.

Vendor Compliance and disclosures

Item #5
Contact existing providers to determine which will become fiduciaries under the final rule and verify that they will have an acceptable exemption or other compliance solution to continue providing their services. (Many providers will not be in a position to discuss these issues definitively until later in the year.)

Item #6 For existing service providers which perform fiduciary functions, compliance solutions which they relied on in the past may be changing in conjunction with the final rule. The terms of relationships with all these providers, including representations and indemnities, may need to be updated or renegotiated to reflect the new rules.

Item
#7 Adapt existing plan practices and procedures to accept, and be prepared to receive and evaluate, the additional documentation and disclosures expected from product and service providers.