The Department of Labor Confirms June 9th as the Effective Date of the Fiduciary Rule: What Employers Need to Know Now

by Dickinson Wright

Dickinson Wright

On May 22, 2017, Secretary of Labor Jim Acosta announced that, after having been delayed 60 days, the Department of Labor’s (“DOL”) Conflict of Interest Rule (“Fiduciary Rule”) will largely apply on June 9, 2017. At that time, an expanded definition of “fiduciary” will go into effect and “Impartial Conduct Standards” will be a requirement of certain prohibited transaction exemptions. As a consequence, some service providers, such as brokers and recordkeepers, may find that they are now fiduciaries. Employers, in their role as plan fiduciaries, have an increased obligation to monitor the activities of these additional fiduciaries so to ensure that the activity is exempt from the prohibited transaction rules.

This Client Alert provides a brief overview of the Fiduciary Rule and outlines some practical steps that employers can follow to ensure compliance in light of its implementation.

What Becomes Effective on June 9?

Under the new Fiduciary Rule, the previous five-part test for defining who is a fiduciary that provides investment advice is replaced with a new objective inquiry test. Under the new test, any communication that meets the following requirements constitutes fiduciary investment advice:

  • A “recommendation” regarding specific investment transactions or investment management, including advice related to roll-overs;
  • Directed at a plan, plan participant, beneficiary, IRA or IRA owner;
  • For a fee or other compensation, direct or indirect; and
  • Made directly or indirectly by a person who acknowledges fiduciary status, has an agreement or understanding with a recipient that the advice is tailored to him/her, or otherwise tailors specific advice to a specific recipient or recipients.

A “recommendation” is a “communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action.” The more individually-tailored a communication is, the more likely it would be a recommendation.

Fiduciaries who receive commissions or other variable compensation (as broadly defined in the new Fiduciary Rule) must comply with the Impartial Conduct Standards on June 9, 2017. These standards generally require that the fiduciary:

  • Give advice that is in the retirement investor’s best interest;
  • Charge no more than “reasonable compensation;” and
  • Make no misleading statements about investment transactions, compensation, and conflicts of interest.

Fiduciaries impacted by these regulations temporarily benefit from a “good faith” compliance transition period until January 1, 2018, when additional disclosure and contractual obligations will go into effect. During the transition period, the DOL intends to focus on compliance assistance rather than penalty enforcement, as long as fiduciaries act in good faith.

How Does the Fiduciary Rule Impact Employers Sponsoring Retirement Plans?

The Fiduciary Rule’s main impact on employers will involve interactions between recordkeepers and investment advisors regarding investment lineups, distributions and rollovers.

During the next few weeks, there are a number of steps that plan sponsors can take to proactively prepare for the implementation of the Fiduciary Rule.

  • Ensure you have prudent processes and procedures. Document all evaluation and monitoring of plan service providers, ensuring that fees are reasonable and all services are necessary; establish effective internal controls to evaluate plan operations; review, maintain, and update any investment policy statement; and ensure that formal fiduciary training is regularly provided.
  • Evaluate whether employees are acting as fiduciaries. Ensure that human resources and finance employees are not providing fiduciary advice to participants. Generally speaking, employees may discuss plan rules, investment options, and distribution options without becoming fiduciaries, so long as the employees are not giving particularized advice. Employees may also provide reports to retirement fiduciaries (e.g., regarding enrollment or investment performance) without becoming fiduciaries, so long as those employees are not receiving additional compensation for those services beyond their normal pay.
  • Review agreements with your recordkeeper. Determine whether your recordkeeper is acknowledging fiduciary status for either investment lineup choices or call center advice to participants. Some recordkeepers are assuming “point-in-time” fiduciary status for making investment lineup suggestions under which they accept fiduciary status only at the time of the specific investment communication with participants, but are disclaiming an ongoing fiduciary duty to monitor the propriety of those investments. Other recordkeepers are acknowledging fiduciary status with respect to participant call-center investment and rollover advice. On the other end of the spectrum, some recordkeepers maintain that all of their interactions with plan fiduciaries and participants are non-fiduciary in nature. Some recordkeepers are making changes to agreements via negative consent (i.e., unless the plan sponsor responds, it will assume the plan sponsor consents to the change). It is critical that plan sponsors understand the position that their recordkeeper is taking and ensure that their recordkeeper acknowledge its fiduciary status if it is acting as a fiduciary. Plan sponsors should review investment education materials, rollover and distribution forms, call center scripts as they relate to rollovers, and other recordkeeping related processes to be sure they reflect the requirements of the Fiduciary Rule.
  • Review agreements with your investment advisor. Plan fiduciaries must understand the services that are being provided by the plan’s investment advisor. Plan sponsors should have a clear understanding whether their advisor is acting either as a broker or as a registered investment advisor (“RIA”). If the advisor is acting as a broker, and the advisor is directly or indirectly receiving commissions, 12b-1 fees, trailing payments, asset-based revenue sharing, solicitor’s fees, or payments from custodians, as a result of investment or insurance recommendations, the payments would be prohibited transactions, unless an exemption applies. If the advisor is an RIA, ensure that it has acknowledged its fiduciary status in writing.
  • Continue to monitor fiduciaries. If a service provider has assumed fiduciary status or expanded the scope of its services so that they are fiduciary in nature, the plan sponsor has an increased burden to monitor its performance, because of the duty to monitor imposed by ERISA. Any subsequent notification from that service provider that purports to limit or disclaim future fiduciary responsibility should be reviewed carefully. If a service provider determines it will not be a fiduciary and is not going to continue to provide certain services such as distribution or rollover guidance, a plan sponsor should consider the impact of the loss of these services on participants, and should consider other options for assisting participants when these events arise.


Even though the Fiduciary Rule is being implemented on June 9, the DOL’s review is ongoing. The DOL plans to request information from the public as a part of its continued examination of the Fiduciary Rule, and may consider further delays or revisions based on the responses it receives. We continue to monitor these developments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dickinson Wright | Attorney Advertising

Written by:

Dickinson Wright

Dickinson Wright on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.