The DOL conflict of interest rule which, as far as anyone knows, will still go into effect on April 10 2017, changes the definition of who will be considered a fiduciary under ERISA. It also changes the definition for those making recommendations on IRAs. But under the department of unintended consequences, will employees inadvertently become a fiduciary and incur liability by giving fellow plan participants advice?
Let’s back up. A person becomes a fiduciary under the current definition if they take the following actions:
- Provide and individual advice for a fee;
- On a regular basis;
- Through a mutual understanding;
- Is the primarily basis for the decision; and
- The advice is individualized.
But under the new definition according to the Thompson Coburn law firm,
…a person who makes a single, isolated suggestion for a fee to a retirement income investor, such as a participant in an employer-sponsored 401(k) plan, on how to invest or whether to roll over plan assets is considered an ERISA fiduciary.
Even recommending that an employee rollover their plan assets or suggesting using another plan advisor may be a fiduciary act. So what about an employee innocently helping a fellow worker or a person in the HR or finance department? According to the Thompson Coburn law firm, these employees would not be considered a fiduciary if they do not receive additional compensation for that activity. On the other hand,
…an employee whose job description included assisting plan participants in selecting investment options in a self-directed 401(k) plan probably would be considered an ERISA fiduciary.
HR and finance employees may inform workers in their corporate retirement plan about investment options in the plan as well as provide performance reports and recommendations given to the Investment Committee without incurring fiduciary liability.
