On April 5, 2016, the Department of Labor announced the long-awaited final version of its updated fiduciary regulations. As expected, the new rules broaden the definition of who should be considered a fiduciary for any accounts with investment features, such as retirement plans, individual retirement account (IRA) and health savings account (HSA). The intent of these revisions is to expand the number of advisors subject to ERISA’s fiduciary standard.
Advisors who previously relied on outdated rules to avoid the greater responsibilities of being deemed a plan fiduciary will find it more difficult to continue to do so. While we are still studying the impact of these regulations on the plan sponsors, several key highlights have already emerged:
- The new rules apply almost exclusively to advisors and what constitutes investment advice when dealing with the investments in a retirement plan, IRA, HSA or rollovers into IRAs
- Advisors will be deemed a fiduciary by providing advice, even if they fail to acknowledge their fiduciary status in writing
- Advisors may take on additional fiduciary responsibility without having to overhaul their fee structure by entering into a Best Interest Contract (BIC) with the client
For advisors such as Frenkel, who already acknowledge their status as a plan fiduciary on retirement plans in writing, the new rules don’t seem that onerous. These advisors are already addressing the fiduciary standards of acting in the best interest of their client and utilizing a prudent process. Certainly, some additional paperwork and disclosures will be required by these regulations, but it will not require a wholesale change in the way they do business. Frenkel does not provide investment guidance on HSAs and therefore, we do not consider ourselves fiduciaries on these products.
Finally, there is no rush to implement the requirements. The new rules do not need to be adopted until one year from now, April 10, 2017, with certain disclosure requirements not due until January 1, 2018.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services offered through Global Retirement Partners, LLC, a registered investment advisor. Global Retirement Partners, LLC, Frenkel Benefits, LLC, and LPL Financial are separate and non-affiliated companies.
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