Compliance

PSNC 2016: Fiduciary Rule Fundamentals

The final fiduciary rule is out, so what do you need to know? And, just as important, what can you do right now to prepare? 

By John Manganaro editors@plansponsor.com | June 16, 2016
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According to Steven Wilkes, of counsel, the Wagner Law Group, there are more than a few pressing items that should be top of mind for plan sponsors heading into the back half of 2016—but chief among them is probably prepping for the Department of Labor’s (DOL) fiduciary rule reform.

Wilkes outlined his argument during the opening day of the 2016 PLANSPONSOR National Conference, held for the first time this year in Washington, D.C. Just a few miles from the department’s headquarters, he urged plan sponsors in the audience to study the broadening of the DOL’s definition of the term “fiduciary” directly to determine how it will apply to the intricate workings of their own plans.

It won’t be easy or particularly fun actually sitting down and reading the 1,000-plus pages of rulemaking, he admits, but there is so much that can vary from plan to plan that individual sponsors absolutely must perform their own review. “The time to start asking questions of your service providers is now,” he suggested, warning those who simply take a cursory look or simply do nothing at all may find themselves in for a rude awakening as implementation deadlines pass in 2017 and 2018.   

“Service providers should be eager to help you make any necessary adjustments, and any plan counsel you have access to should review your documentation and the documentation needed by any providers to qualify for exclusions/exemptions,” Wilkes said. “It’s a complicated rule, but there is nothing like engaging with the language yourself and asking the tough questions for yourself.”

On Wilkes’ reading, the new rule “clearly broadens the scope of advisers who will be deemed to be individual retirement account (IRA) or defined contribution (DC) plan fiduciaries.”

“It impacts all plan vendors in at least a peripheral way,” he warned, “not just broker/dealers or registered investment advisers earning commission-based compensation. Exclusions from the new definition will directly encourage the increased flow of information to plans, so that is something else to watch out for. You will soon start seeing drafts of disclosures and warranties coming from asset managers, advisers, recordkeepers and other providers.”

Staying true to the “Fiduciary Rule Fundamentals” presentation title, Wilkes explained the key deadlines plan sponsors should be working towards alongside counsel and plan providers.

“We all remember the new rule was finalized on April 8, 2016, and barring any successful litigation that could put the brakes on implementation, the new definition is effective just about a year later, on April 10, 2017,” he said. “The phase-in of the prohibited-transaction conditions start with the interim conditions, effective April 10, 2017, and then they roll into heavier conditions going into effect Jan 1, 2018.”

NEXT: Boiling it all down

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