DOL Fiduciary Rule

DOL Fiduciary RuleView This Newsletter: DOL Fiduciary Rule


On April 8, 2016 the Department of Labor (DOL) issued final guidance that greatly expands the types of retirement investment advice that will be subject to the fiduciary duty rules under the Employee Retirement Income Security Act of 1974 (ERISA). The so-called “conflict of interest” rule for retirement investments will have a significant effect on those who provide investment advice and sell investment products and services to retirement plans and IRAs. The central focus of the DOL guidance is to protect plan participants from conflicts of interest that could threaten their retirement savings.

  • Background
    • This new guidance was prompted by the changing landscape of retirement plans over the past 40 years with the shift from employer-sponsored defined benefit plans, with no participant investment responsibility, to participant directed 401(k) plans.
  • Activities Considered Investment Advice
    • The advisability of buying, holding, selling or exchanging securities or other investment property;
    • The management of securities or other investment property such as advice regarding investment portfolio composition, selection of other persons to provide investment advice or management services or selection of investment account arrangements;
    • Rollovers, transfers or distributions from a plan or IRA including whether, in what amount, in what form and to what destination such rollover, transfer or distribution should be made; or
    • How to invest securities or other investment property once they are rolled over, transferred or distributed from the plan or IRA.
  • Advice Provider Relationship
    • Conditions for being a fiduciary
  • Activities not Considered Investment Advice
    • Providing an Investment Platform for Directed Investment
    • Selection and Monitoring Assistance for Plan Fiduciaries
    • Investment Education
    • Advice Provided by Employees
    • General Communications
  • Best Interest Contract (BIC) Exemption
    • Allows investment advice fiduciaries to receive various forms of compensation that, in the absence of an exemption, would not be permitted under ERISA and the Code.
    • Financial institutions and advisers are required to take several protective steps
  • What Plan Sponsors Need to Know
    • Expect to receive new disclosures and amended contracts from their advisers
    • Some service providers may be less willing to assist participants with the decision of whether or not to roll over their plan assets to an IRA in order to avoid being held to the standard
      of fiduciary in giving advice on such a decision
    • Take a close look at the investment education that is provided to plan participants and beneficiaries to ensure that the investment education qualifies as education rather than advice under the new rules.
  • Conclusion
    • Pending lawsuits could delay or overturn the regulation
    • A new administration in the White House may result in the rules possibly getting delayed or killed
Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting for 401(k)/profit-sharing plans, defined benefit plans, cash balance plans, and 403(b) plans. Pinnacle Plan Design proudly serves businesses nationwide.


Schedule a Call

Let's talk!