In April, the Department of Labor released the finalized version of its fiduciary rule, more than five years after it was first proposed.  Before final release, the DOL received more than 3,500 comment letters and held four days of public hearings.  The final 1023 page governing document provides details on one of the most historic rulings in the retirement plan industry.

This long awaited rule re-defines who is considered a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the Code). The final rule targets those that give investment advice to a retirement plan, its participants or its beneficiaries (including IRAs and 401(k)s); and, as a result, effectively expands the group of individuals who may be considered a fiduciary. According to DOL Secretary Thomas Perez, “At its core, this rule ensures retirement savers get investment advice in their best interest.”

With much to learn about implementation before the rule takes effect April 10, 2017, industry experts have shared the following initial items for a plan sponsor to review:

  1. Take this opportunity to consider fiduciary “best practices” including the duty to monitor the plan’s service providers;
  2. Understand that this rule is directed at investment advice, and is not confined to defined contribution plans – HSAs with investment components are also subject to this rule;
  3. Understand when service providers are and are not acting as fiduciaries;
  4. Review any agreements or correspondence from service providers, particularly investment advisors, for statements regarding their fiduciary status, and note where changes may be forthcoming.

The DOL Fiduciary Rule marks the first meaningful update to regulations of retirement advice since 1975.  With its significant impact on retirement plans, it is important to stay in touch with the plan investment team to review the regulation and ensure compliance.