As a retirement plan sponsor, you often hear a lot about fiduciary responsibilities and how important it is that you meet those responsibilities. It may be easy to overlook just who is a fiduciary to your plan though. On April 10, 2016, the Department of Labor "DOL" issued regulations which expand the definition of a fiduciary and just what services constitute fiduciary advice. It is common to hire an outside investment adviser to assist participants with enrollment into the plan, educate participants on how to go about picking their investments, or to help the plan committee diversify their investment options. Under the new regulations, the DOL is stating that the investment adviser may qualify as a fiduciary now that did not qualify in the past.
Typically, a fiduciary is a person named in the plan document that exercises a certain level of authority over the operation of a plan or the assets of the plan. A person that provides investment advice with respect to assets of the plan for a fee will now also be deemed a fiduciary and will be held to the standards of other fiduciaries. It is important to discuss this regulation with your investment advisers now to determine if they are fiduciaries or will become fiduciaries under the new guidance. Advisers often provide materials to participants explaining investments, but even this can now be construed as investment advice even if no specific investment is directly recommended. Education materials can be provided by advisers, but material should be reviewed now by Plan sponsors to ensure the new regulations are followed. The educational materials would now need specific disclosures with them if the adviser wants to avoid being named a fiduciary. Even offering one-time advice to a plan for a fee will kick that adviser into fiduciary status.
Another area of caution is advising participants how to direct their distributions or rollovers from the plan-this would also be deemed investment advice subject to these fiduciary regulations.
As with most regulations, there are many more components within the DOL regulation, so please discuss this with your advisers, third party administrators, and accountants to be sure involved parties are all meeting their responsibilities and fulfilling their fiduciary responsibilities if they meet the definition of a fiduciary.
