While most 401k and 403b plan sponsors are safe to assume that the DOL fiduciary rule set to go into effect June 9th will not require dramatic changes for them, it will affect their service provider partners and their relationship with them. The recently released DOL FAQ gives some guidance and insights into the new administration’s possible direction.
Comment on Impartial Conduct Standard
“The [impartial conduct] standards specifically require advisers and financial institutions to:
- Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty:
o Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
o Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;
- Charge no more than reasonable compensation; and
- Make no misleading statements about investment transactions, compensation, and conflicts of interest.”
Help with Compliance v. Penalties
“The Department’s general approach to the June 9 implementation will be marked by an emphasis on compliance assistance (rather than citing violations and imposing penalties). This includes issuing a new temporary enforcement policy for the transition period, under which the Department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions.”
In addition, the DOL clarified that certain participant communications would not be considered advice including:
- Emails urging participants to increase deferrals with benefits specific to that person;
- Online tools that suggest how well a participant is doing on their path to retirement; and
- Suggestions to increase contributions to take full advantage of a company’s match
Robo’s advisors can get relief under BICE as long as fees are level.
Finally, the DOL reiterated that per the President’s directive, they may make additional changes including changing deadlines based on comments they receive from a possible RFI. Stay tuned.
