New Fiduciary Rule – Are You Ready?
The Department of Labor has issued the final rule to address conflicts of interest of advisors to retirement plans. What should you keep in mind with this new rule?
Some of the key provisions are:
· Nearly all types of 401(K) and other retirement plan advisors who provide investment advice to plan sponsors will now be required to act in the best interests of the plan sponsors and participants. If they don’t, they will be subject to potential liability.
· In the past, certain financial advisors were not subject to liability but they now could be for violating the best interests standards.
· The plan sponsor (employer, board and staff) is already a fiduciary and could now be liable for hiring advisors who do not follow the new best interests standards.
Implementation of the final rule will be phased in so plan sponsors won’t be hit with everything all at one time. The first deadline is April 10, 2017, when the educational requirements and investment advice provisions will take effect. The second deadline is January 1, 2018. By this date the participant disclosures and new documents will need to be modified.
This new rule is going to change the relationship between plan sponsors (employers) and service providers. The advisors will now be fiduciaries to the plan sponsors. There will be more paperwork and the need to know how and to whom the money flows. New contracts and explanations of the relationships from vendors will probably be needed.
Plan sponsors will need to ask their advisors if they are fiduciaries to the plan. The failure to ask this question could be deemed a fiduciary breach by the plan and have ugly implications. Additional resources may be found at www.dol.gov/ebsa/regs/conflictsofinterest.html.
Jacque Curtin is the CFO at SCACPA. She has numerous years of accounting experience with nonprofit and for profit organizations. Jacque received her accounting degree from the University of South Carolina.