DOL Clarifies Disclosure Requirements and Investment Recommendations for Fiduciary Rule. Though the DOL’s conflict of interest rule went into effect June 9, 2017, questions remain about the rule, the Best Interest Contract (BIC) exemption, and enforcement. In a recently released FAQ, the DOL sought to make specific clarifications regarding revised disclosure requirements under 408b2 and investment recommendations.
Because the June 9th rule changed the status of some covered service providers under 408b2 that had not been considered fiduciaries, the question is whether revised disclosure would be required.
Specifically, the DOL stated:
In light of those concerns, during the Transition Period, the Department would treat a covered service provider as satisfying the 408b-2 regulation fiduciary status disclosure requirement in connection with the person’s provision of fiduciary investment advice as a result of the Fiduciary Rule becoming applicable on June 9, 2017, if, in addition to any other required disclosures under the 408b-2 regulation, the covered service provider furnishes an accurate and complete description of the services that will be performed under the contract or arrangement with the plan, including the services that would make the covered service provider an investment advice fiduciary under the currently applicable Fiduciary Rule…
However, in the case of a service provider who is providing or reasonably expects to provide fiduciary investment advice services within the meaning of the currently applicable Fiduciary Rule and whose contract with or disclosures to an ERISA pension plan client include a statement that the service provider is not a fiduciary or is not providing fiduciary services, the Department would not treat the service provider as having furnished the plan with an accurate and complete description of the services that will be performed under the contract or arrangement until a revised contract or disclosure is provided that removes or corrects that affirmatively incorrect statement.
Revised disclosures are required within 60 days of changes or as soon as practicable. Realizing the uncertainty surrounding the conflict of interest rule, the DOL does not expect providers that need to change agreements to comply within 60 days of June 9th.
Further, the DOL stated that general recommendations to plan participants or administrators encouraging them to increase contribution that does not mention a specific investment would not be considered fiduciary advice under their new rule.
