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How the Fiduciary Rule Affects Retirement Plan Sponsors


April 8, the U.S. Department of Labor (DOL) published in the Federal Register its long-awaited—and highly controversial—final rule to address conflicts of interest in retirement advice by applying the so-called fiduciary standard to those who provide investment advice to sponsors and participants in 401(k)-type workplace retirement plans and individual retirement accounts (IRAs). The rule had been made public two days earlier.

The rule “affects how investment advice is provided to every 401(k) plan, every IRA, and every rollover or distribution to or from either,” according to a U.S. Chamber of Commerce issue brief.

While aimed at financial advisors who provide retirement plan services, the final rule will impact compliance obligations and costs for plan sponsors as well, regulatory experts say.

“Most retirement plan sponsors have a hazy understanding about what a fiduciary is and if their advisor is acting as one,” commented Robert Lawton, president of Lawton Retirement Plan Consultants in Milwaukee. “Plan sponsors working with advisors who haven’t been acting as fiduciaries will be approached by these advisors as they begin to define a new working relationship. They are likely to outline relationships that feature higher costs. There will also be additional paperwork to sign, which describes their fiduciary limitations.”

Advised Lawton, “Now may be a good time to re-evalute the relationship you have with your advisor, at the very least to gain clarity on his or her fiduciary relationship with your 401(k) plan.”

The DOL posted a fact sheet highlighting key aspects of the final rule, and a chart detailing the differences between the proposed and final rules.

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