There’s a lot of speculation about whether the Department of Labor’s (DOL’s) conflict of interest rule (DOL rule) will ever see the light of day, be revised or delayed especially with President-Elect Trumps recent nomination of a new DOL Secretary. But speculation is all that there is in the market and since the DOL rule will not change what plan sponsors need to do immediately or affect their fiduciary status, it raises the question of what should employers sponsoring a defined contribution (DC) plan like a 401k or 403b be doing right now if anything?
We asked that question to Joe Brummell Director Retirement Plan Consulting atWealth Enhancement Group in the Minneapolis area who is also a TPSU Adjunct Lecture for that Education Zone. Joe replied:
I provide “Five Practical Questions for Plan Sponsors:”
- What are the current and future fiduciary statuses of each service provider?
- Does your financial professional have the qualifications and capabilities to meet a fiduciary standard of care (esp. prudent expert)?
- What is each service provider’s compensation, and is it reasonable?
- What conflicts of interest exist with each service provider, and will they be using the Best Interest Contract (BIC) Exemption to allow for conflicted compensation under the new rule?
- Do any service providers take rollovers from participants, and how will they do so under the new rule?
I think the answers to these questions should reveal a lot for plan sponsors. It should be noted that plan sponsors should not simply provide this list of questions to their financial professionals or other service providers, because that enables them to spin the answers in reply. Plan sponsors need to do a little due diligence themselves in answering some of these questions.
Other questions that plan sponsors should be asking record keepers is whether they are taking on a fiduciary role and under what circumstances. For example, one of the largest DC record keepers which also has an active investment management division is willing to be a “point in time fiduciary” if a client ask them to analyze a fund. The fiduciary status ends after the analysis is provided – until the next time.
Plan sponsors also need to understand what type of guidance record keeper call centers will and will not provide plan participants under the new DOL rule and whether any of it will be provided as a fiduciary. The real question is who will be overseeing the calls but even before that plan sponsors should have clear guidelines from their record keepers.
Because if you don’t ask all these questions and follow-up with documentation, what you don’t know can and probably will hurt you.
