Our colleague Jason Levy recently published an article in The Actuary Magazine on the Department of Labor’s fiduciary conflict rule. More than six years in the making, this rule represents perhaps the most significant regulation from the DOL during the Obama Administration.
The fiduciary conflict rule expands the definition of fiduciary to cover, with certain exceptions, all investment advice provided to a retirement plan (like a 401(k) plan, defined benefit pension plan, or an IRA), or to a participant or beneficiary in any of those retirement plans. The rule imposes fiduciary status on a broad category of professionals, including many broker-dealers who previously had taken the position that they were not investment advice fiduciaries based on a DOL regulation that had been in place since 1975.
In contrast to the sweeping changes it imposes on investment advice professionals, the fiduciary conflict rule will have a far more modest effect on employers. The rule is not intended to confer fiduciary status on sponsors of retirement plans. Likewise, there had been concern under the proposed version of the rule that human resources and other employees who interact with participants might be considered fiduciaries when they discuss retirement plan investments with their co-workers. However, the final version of the rule provides that, absent unusual circumstances, such employees would not be covered.
Nevertheless, the fiduciary conflict rule has important implications for employers that sponsor retirement plans.