Los Angeles partner Fred Reish and Washington, D.C. partner Brad Campbell were quoted in a BenefitsPro article titled “Despite Possible Fiduciary Delay, Important Compliance Requirements Remain.” While a delay of the fiduciary rule’s January 1, 2018, implementation date seems likely, Fred and Brad noted that brokers and advisers to 401(k) plans will still need to be in compliance with the rule during the existing transition period.
Under Regulation 408(b)(2), a 401(k) plan service provider is required to disclose his “fiduciary status” whether or not he is serving as a fiduciary. If that status changes, the provider must disclose the change to his client within 60 days. Fred explained that, while separate from the fiduciary rule, the 408(b)(2) disclosure requirements are heavily impacted by it and that many broker-dealers might be unaware of this relationship.
“These are separate sets of rules and the fiduciary regulation and exemptions do not address 408(b)(2),” Fred said. “A service provider has to make that connection upon becoming a fiduciary. The focus on complying with the fiduciary rule does not necessarily lead to the 408(b)(2) disclosure rules.”
Brad noted the additional burden placed on plan sponsors under the fiduciary rule’s impartial conduct standards, explaining that sponsors will now need to know every conflict of interest for plan advisers and determine whether each plan adviser is correctly using the Best Interest Contract Exemption. The impartial conduct standards also change how record-keepers service plans, and the changes may require new service agreements. “Sponsors will want to have something on file that shows [they] considered the changes,” Brad said.
Brad added that now the fiduciary rule’s impartial conduct standards have been implemented, sponsors may want to consider issuing requests for proposals to make sure they are satisfying their monitoring requirements.