Although much of the rule’s impact will be borne by advisors and plan record keepers, the expanded definition of a fiduciary will affect plan sponsors, who have been held as fiduciaries since the Employee Retirement Income Security Act was passed more than 40 years ago.
Heightened monitoring responsibilities on service providers
One of the rule’s primary purposes is to assure that 401(k) investors don’t receive conflicted advice when it comes time to roll over assets to IRAs.
When Labor amended and delayed the first scheduled implementation date to June 9, it relieved the regulated community from the requirement of explaining to investors and employers, in writing, their role as fiduciaries.
Heightened monitoring responsibilities on HR
The rule attempts to clearly separate non-fiduciary investment education from fiduciary recommendations.
Protection amid the uncertainty
Admittedly, DeMatties says much of the speculation on new liability is theoretical. Whether or not sponsors will face new avenues of litigation under the rule remains to be seen.
But the rule does add to the list of potential violations that can be very hard to defend, he says.