Tp lan sponsors do not need to offer, or facilitate offering, investment advice to participants if they are afraid to, based on fiduciary concerns. “But some sponsors really want to make sure they do
everything they can for their participants—and that’s both
a blessing and a curse for those sponsors,” says Jason Rothman,
managing consultant at consulting firm Findley Davies in Cleveland.
It’s a blessing because providing that advice can help more employees
retire on time with enough money—and a curse because it makes plan sponsors more vulnerable to fiduciary risks. The new fiduciary rule from the U.S.
Department of Labor (DOL) took effect June 9, and it broadens the scope of
who and what fall under the fiduciary umbrella. In May, the DOL also released
frequently asked questions (FAQ) to help clarify how the new rule applies.
The DOL wanted to make sure the new regulations cover a wide array of
participant communications related to rollovers, says Dominic DeMatties,
a partner at law firm Alston & Bird LLP in Washington, D.C., and former
attorney adviser in the U.S. Department of the Treasury’s Office of the
Benefits Tax Counsel. “It purposely drew a very broad line, and now [the
rule] includes some things that people may not have considered fiduciary
acts before,” although the FAQ have pared back plan sponsors’ and advisers’
misunderstandings somewhat, he says.
“The question that remains is: What things has the DOL not thought of
clarifying? And in particular, what has it not thought of that a plaintiff’s
lawyer might think of?” DeMatties says. Speculation that the Trump administration will end up scrapping some or all of the new regulations has made
the situation more unclear for both sponsors and advisers. “So, many people
in the industry are saying, ‘I’ll take a cautious approach now and wait to
see what happens,’” he says. “Is now the right time to come out with a new
participant investment-education initiative, when you’re not sure where the
rule might land?”