Taking Stock: Will the Fiduciary Rule Get Trumped?

December 14, 2016 / by Ross A. Bremen, CFA, Partner

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The Department of Labor’s new Fiduciary Rule will kick in on April 10, 2017. The Rule raises the position of financial professionals working with retirement plans to that of a fiduciary, that is, it compels them to act in the best interests of their clients and put the clients’ interests first. Affected retirement plans include defined contribution plans such as 401(k) accounts, defined benefit plans and individual retirement accounts. 

The Rule also affects plan sponsors who select the service providers for these retirement plans. Plan sponsors should take stock of the service providers—ranging from investment consultants, to record-keepers and those who service managed accounts—who will now assume a fiduciary role. It’s important to make sure everyone—plan sponsors and service providers—is on the same page on what constitutes a fiduciary activity and to determine there are no conflicts of interest. The new Rule also calls for a review of internal policies to ensure folks in HR and Benefits are not giving out what is now considered fiduciary advice. Over the longer term, we also suggest monitoring service providers to ascertain the reasonableness of their fee structure.

How does this new Rule change the way we work? The short answer: It doesn’t change much as NEPC has always acted as a fiduciary and we take our role as a fiduciary to our clients very seriously.

Of course, a number of events could delay, alter or altogether eliminate the new requirements before the rule goes into effect on April 10. For instance, a new Secretary of Labor and Assistant Secretary of the Employee Benefits Security Administration could change the course of events. If the Senate confirms their appointments before the rule goes into effect, there is a possibility that implementation is postponed. Also, there are cases filed against the rule and courts could find fault with the requirements.

So, what should you be doing now? In addition to talking with your ERISA counsel, I would suggest calling your NEPC consultant for the latest developments to see how they might impact your plan and plan participants.



Topics: Defined Contribution, Private Wealth, Commentary

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