It’s one of the most-anticipated (and most-delayed) regulatory wrinkles in retirement industry history, but the DOL’s fiduciary standard is still apparently looming on the horizon – and could debut, even by this fall.

For retirement plan advisers – and the plan administrator community, in an associated fashion – it remains more than a bit problematic to cope with the prospect of a new threshold of responsibility for the financial decisions of plan participants. Or, having their hands tied and only being able to offer extremely financial guidance, as the case may be.

At this week’s NAPA 401(k) Summit in New Orleans, NAPA leadership reiterated that the much-discussed regulations are still scheduled to debut later this year, bringing with them some immediate headaches for advisers and sponsors alike.

Marcy Supovitz, principal, Boulay Donnelly & Supovitz Consulting Group, Inc. and founding NAPA president, says a preliminary version of the fiduciary standard rules suggests some serious immediate limitations on what advice and input advisers can provide.

“If you’re serving as a fiduciary, participants still want to talk to you, but you can’t talk to them,” she warns. “Under the original DOL rules, you’ll have to tell them that ‘I can’t help you.’ That is so counterintuitive for the vast majority of participants.”

More troubling, notes Steven Dimitriou, managing partner with Mayflower Advisors – and NAPA’s new president – the fiduciary guidelines create a mixed message for plan sponsors looking to encourage participants into taking part and saving more.

“What’s worse, that adviser is the only contact that most employees have, and we know that they’re not just looking for someone to lay out the pros and cons – they want you to do it all for them,” Dimitriou says. “Now, if you help them make that decision, and suggest ‘this is what I would do,’ that distinctly crosses the line.”

“These people have a relationship with you, and they’ve grown accustomed to your help,” adds Joe DeNoyior, of Washington Financial Group. So, in the meantime, he suggests the industry do what it can to continue to work on behalf of sponsors and participants, rather than being caught up in a mess of partial responsibilities. “We’re not just pushing them out into the woods,” he says.

Legal expert Fred Reish, with Drinker Biddle & Reath, says the issue now is continuing to second-guess “what this non-existent regulation means,” one that’s been a looming threat since 2012. Reish says the DOL itself suggested the final regulations – expected to be very close to the tone of the preliminary regs – should appear by this August, but with mid-term election season on the horizon, he’s thinking January 2015 is a more likely target.

Much of the delay so far – and a bit of a lesson to those in the retirement industry – is that the initial rulings were proposed and withdrawn after heavy objections from the financial services sector, with the broker-dealer community and insurance companies themselves vehemently opposed to a list of prohibited transactions.

Reish says the major obstacle for advisers and plan sponsors will be the regulation’s proposals on IRA rollovers and individual brokerage accounts, with the IRA guidance “flawed,” in his opinion.

That issue also seems like something of an inter-agency fight as IRAs are not regulated by ERISA and the DOL has no legal enforcement authority, although independent changes to the Internal Revenue Code will cause even more of a jurisdictional battle between the DOL and the IRS.

Whatever the case, Reish says the climate is right for anyone involved to consider vigorous fiduciary training or working to outsource their fiduciary responsibilities – or, hire a lawyer to help with the issue, he adds.     

Register or login for access to this item and much more

All Employee Benefit News becomes archived within a week of it being published

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access