The Department of Labor’s much-anticipated fiduciary rule is ushering in many changes across the retirement services landscape, and the new rules governing the “what, how and why” for advice at the time of a participant’s job change will undoubtedly transform the rollover-to-IRA market. However, a closer reading of the fiduciary rule sends a clear, if unstated, signal to plan sponsors, financial advisers and recordkeepers: Absent a compelling reason to roll over to an IRA, keep participants invested in a qualified defined contribution plan throughout their working lives.
Why would the Department of Labor send such a signal? For starters, qualified plans are already subject to fiduciary standards and regulatory protection under ERISA, which has been in effect for more than 40 years. These standards include an obligation to negotiate fees (lower fees achieved through group pricing is a widely recognized benefit), regularly review investment options, routinely communicate plan provisions and changes, and, in all respects, act in the best interests of the plan’s participants. The DOL’s goal of extending these types of protections to participants who roll over to an IRA is commendable. But sponsors can keep participants from having to worry about whether the advice they receive related to rollovers is in their best interest simply by enabling them to stay in qualified plans to begin with.
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