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​Fiduciary Compliance for Retirement Plan Sponsors: What it means in light of the new DOL Fiduciary Rule

​​By Chase Deters, Director of Operations, Portfolio Manager at Raffa Wealth Management

In light of the new DOL rule that expands the “investment advice fiduciary” definition under ERISA, fiduciary compliance for retirement plan sponsors has never been more important.  Harry Atlas of Venable, LLP and I have teamed together to educate nonprofits on the new rule and accompanying conflict of interest rules, recent litigation against retirement plan sponsors, and fiduciary best practices. 

Join us on November 1st, at 9 am for an introduction on the upcoming DOL regulation, an outline of what to look for, and what you might be able to expect in regards to your organization’s retirement plan. Register now!

In the meantime, feel free to reach out to me directly for clarification or to understand how these rules will impact your situation specifically.

The new rule will significantly expand the circumstances in which broker-dealers, investment advisors, and other individuals treated as fiduciaries to non-ERISA plans (including many non-profit 403(b) plans and 457 plans) and IRAs are prohibited from receiving commissions.  Specifically, the DOL is concerned about compensation that varies with the investment choices being made or from recommending proprietary investment products without falling under the Best Interest Contract Exemption (BICE). 

Since any investment advisor who provides investment advice for a fee is a fiduciary under the DOL’s regulation, the BICE will allow many brokers and advisors to continue doing business with retirement accounts, but there will be a significant increase in both compliance requirements and litigation risks.  These additional requirements include (but are not limited to):

  • A written Contract with the investor (for IRAs and non-ERISA retirement plans)
    • Including a statement of fiduciary status
    • Confirmation that advice being given is in an investor’s best interests
    • Quarterly update requirement
  • Several disclosure requirements
    • Contact disclosures
    • Point-of-sale disclosures
    • Website disclosures
    • Proprietary product disclosures
    • Third-party payment disclosures

For advisors who fall into a narrow category in regards to the advice and compensation they provide, there is also a specific exception under the BICE rules for “level-fee fiduciaries.”  This BICE – Lite exemption for level-fee fiduciaries require advisors to provide (but are not limited to):

  • A written statement of fiduciary status
  • Compliance with standards of impartial conduct
    • Obligated to act in the investors best interests
    • Receive reasonable compensation for transactions
    • Avoid making misleading statements
  • Written documentation for the reasons for the recommendation

One of the likely goals of the DOL in passing these regulations is to remove any sales quotas that could lead to recommendations that are not in the best interest of the investor, as well as providing a written disclosure of any material conflicts of interest that will be readily available for investors to review. 

As investors and non-ERISA retirement plan sponsors, the difficulty will continue to be the ability to identify and interpret the important information pertinent to them and their situation, under the mountain of disclosures that institutions will now be required to provide.  Again, you are welcome to reach out to us directly for assistance.

If you have any questions about the new rule or how Raffa Wealth can help your organization, please contact me at chase@raffawealth.com or 202 955 7217.