Plan sponsors and advisers must examine their practices and consider how to adjust their behaviors and their agreements to conform to the new rules.
In addition to redefining what is an “investment-advice” fiduciary, the Labor Department has included in the package helpful “carve outs’ from the definition, new prohibited transaction exemptions, and proposed amendments of several existing prohibited transaction exemptions. Surprisingly many existing types of arrangements with 401(k) plan sponsors will continue under the new rule, with only minor adjustments. Other arrangements, in particular, one-on-one advice relationships with plan participants or IRA owners may require substantial adjustments in service models.
Comment Period and Hearing
The proposal package is subject to a 75-day public comment period that ends in June 2015 and there will be a public hearing. These procedural steps will lead to one of three results: (1) publication of the package as proposed; (2) publication of the package with changes; or (3) withdrawal of the package.
If finalized, the new rules will go into effect eight months after they are published in the Federal Register.
For more detailed information on the Labor Department proposal, see The Fiduciary Responsibility eSource at erisapedia.com.