The DOL’s new fiduciary rule is scheduled to become effective in September, and retirement plan advisors and plan sponsors have plenty to do to prepare for the changes it will bring.
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Jerry Schlichter, founding and managing partner of Schlichter Bogard LLC and a well-known pioneer of retirement plan excessive fee litigation, visits the 401(k) Specialist Podcast to share some important insights on the upcoming changes, legal challenges and what advisors need to be doing to prepare for compliance.
Key Insights Include:
- Uncertainty Surrounding the DOL Fiduciary Rule: The Department of Labor’s (DOL) new fiduciary rule is scheduled to become effective in September, but it faces significant legal challenges. Lawsuits from the Federation of Americans for Consumer Choice and various insurance trade groups argue the rule is arbitrary, capricious, and unconstitutional, mirroring concerns from the 2016 rule which was vacated by the courts.
- Key Changes and Implications: If implemented, the rule broadens the definition of who is considered an advisor, encompassing those giving advice on a wide range of retirement assets, including IRAs and annuities. Notably, it includes insurance agents under ERISA’s high standards for the first time. Advisors and plan sponsors must ensure advice is in the best interest of participants, necessitating thorough preparation, including developing detailed investor profiles and providing comprehensive disclosures and explanations.
- Plan Sponsor Responsibilities: Plan sponsors must be cautious to differentiate between education and advice, ensuring educational resources do not inadvertently become recommendations. Additionally, the use of participant information by recordkeepers for selling products outside the plan is seen as a fiduciary breach, a point of ongoing litigation, emphasizing the need for strict adherence to fiduciary duties and standards.
SEE ALSO:
- Fred Reish Unpacks the DOL’s New Fiduciary Rule
- Nine Insurance Trade Groups Sue DOL Over Fiduciary Rule
- FACC Files Second Lawsuit Against DOL Fiduciary Rule
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
