In addition to federal laws and regulations, businesses must also pay attention to state-level laws that
might affect their benefits and programs. Here are a few recent changes at the state level that specifically apply to benefit fiduciaries and best interests.
- Connecticut: As of the first of this year, a company responsible for administrating a retirement plan offered by a political subdivision of the state, such as a county or town, will need to disclose fees paid for investments and fees paid to individuals who provide investment advice.
- Maryland: Recently, a new bill called the “Financial Protection Act of 2019” was introduced that would impose a new fiduciary standard on individuals such as insurance brokers and representatives. This standard includes language saying that they must act “in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.” This best interest standard would also apply to investment advisors. Currently, the legislature is holding hearings to clarify the bill’s language, so changes may yet be forthcoming.
- Massachusetts: Securities regulators have issued proposed regulations and are seeking comments regarding investment advisors to create a fee table for their advisory clients. This fee table would show all services offered by the advisor and the fees associated with each service and would be disclosed annually to all the advisor’s clients.
- Nevada: State law now clearly indicates that financial planners, broker-dealers, sales representatives, and investment advisors have a fiduciary duty towards their clients. Draft regulations have been proposed to comply with this law and a final version of those regulations are expected soon.
- New Jersey: Two new, related bills have been proposed, one which would require financial advisors to disclose fiduciary status to investors and which separates advisors who are subject to a fiduciary duty and those who are not. These non-fiduciary advisors, thus, would have to disclose to clients that they are under no duty to act in the client’s best interest. The second bill requires fee disclosures from persons administering school retirement plans. New Jersey’s Governor, meanwhile, has indicated that he wants regulators to adopt rules that would impose fiduciary duties on all investment professionals.
- New York: New regulations set forth a best interest standard people who sell life insurance and annuities. The seller must believe the product is truly within the best interest of the individual purchasing the product. Policies used to fund certain qualified retirement plans, ERISA plans, and employer-sponsored IRAs are exempt. A new bill was also introduced in the legislature focusing on investment transparency. This includes clearly explaining fiduciary duties, or lack thereof, to investment advisory clients at the outset of an engagement.