Benefits and Compensation

Latest DOL FAQs Clarify Some Major Concerns About Fiduciary Rule

In a related move just ahead of disclosure of the proposed amendments to the fiduciary rule (See, DOL Seeks 18-Month Delay for Complying with Fiduciary Rule Exemptions), the U.S. Department of Labor (DOL) on August 3 released another set of frequently asked questions (FAQs) about the final fiduciary rule that became applicable on June 9.


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Recognizing possible changes to come, the three FAQs give transition relief for providing a 408(b)(2) service-provider change notice of fiduciary status. The FAQs also clarify the scope of fiduciary advice for recommendations to increase plan participation and contribution rates.

Service providers for Employee Retirement Income Savings Act of 1974 (ERISA) plans generally must satisfy a statutory exemption in ERISA Section 408(b)(2) and its implementing regulations that requires service contracts and arrangements to be reasonable and that prohibits them from receiving more than reasonable compensation. Since June 9, questions at service providers may have resulted in some of them failing to amend their disclosures in a timely manner while they awaited DOL guidance.

The early-August FAQs, in Answer 1 (A1.), said: “In the case of a non-fiduciary service provider to an ERISA pension plan that has structured its service contract or arrangement so that it reasonably and in good faith believes that it will not be providing services to the plan that would make it an investment advice fiduciary under the Fiduciary Rule, the service provider would not be required to disclose investment advice fiduciary status under the 408b-2 regulation.”

The DOL said its conclusion in such a matter wouldn’t take into account the possibility that actions of individual agents, representatives, or employees—such as call center employees—implementing a service contract or arrangement may sometimes exceed contract limits in communications that constitute investment recommendations covered under the rule.

How can the new 408(b)(2) relief be interpreted?

“In practical terms, the biggest effect is an extension of the 60-day deadline that otherwise would have expired on August 8. For those who need to make a change, there is now more time to do so,” said an August 10 client bulletin from ERISA attorneys at law firm Drinker Biddle.

But, “The most interesting change is that as long as the service agreement accurately describes the adviser’s services, and as long as the agreement or other writings do not disclaim fiduciary status, the adviser can avoid calling itself a fiduciary during the transition period, even if it is providing fiduciary advice,” the law firm wrote.

The FAQs also address whether recommendations that encourage plan participation or changes in deferral rates constitute fiduciary advice.

Jane Meacham is the editor of BLR’s retirement plan compliance publications. She has nearly 30 years’ experience as a writer/editor of financial services news.