During a conference call on April 5, 2016, Labor Secretary Thomas Perez indicated that the long-awaited final Fiduciary Rule will be released today, April 6th. In a release, the administration explained that “[u]nder the rule, any individual receiving compensation for making investment recommendations that are individualized or specifically directed to a particular plan sponsor running a retirement plan (e.g., an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment decision is a fiduciary.” An individual who is a fiduciary under the rule must provide impartial advice in their client’s best interest and cannot accept any payments which create a conflict of interest unless an exemption applies.
In response to hundreds of comments received after issuance of the proposed Fiduciary Rule, the release explains that several revisions to the proposed rule were made. For ERISA retirement plans, some of the highlights include:
- Expanding the types of investment education and other activities that do not rise to the level of fiduciary advice;
- Expanding the “best interest contract” (BIC) exemption to apply to more investment-related activities and advice to small businesses that sponsor a 401k) plan;
- Allowing the BIC exemption to be available without a contract between the plan sponsor and participants, as long as the investment states in writing that it and its advisors are fiduciaries; and
- Streamlining the BIC exemption’s disclosure requirements, data and record retention requirements, and the exemption’s “level fee” provision.
According to the release, a phased implementation is set forth in the final rule, with the fiduciary definition taking effect with a simplified BIC exemption in April 2017 and full implementation required for transactions on and after January 1, 2018.
To download and read a copy of the final rule, click here: Download DOL Final Fiduciary Rule-23148143. The DOL and the White House published a Fact Sheet summarizing the final rule, available at: White House DOL Fiduciary Rule Fact Sheet. Additional FAQs and information regarding the new rule are available on the DOL’s website.