Final fiduciary rule exempts plan sponsor education

A new fiduciary standard to be released Wednesday by the Department of Labor broadens the definition of fiduciary advice for anyone giving investment advice but allows plan sponsors and their advisers to continue to provide investment education without being considered fiduciaries.

In a Tuesday briefing for reporters, Secretary of Labor Thomas Perez said the updated rule, now known as the conflict of interest standard, is a “fundamental principle of consumer protection” because it requires anyone giving retirement investment advice to act in their client’s best interests. “It’s no longer a marketing slogan; it’s the law,” he said.

The rule expands the definition of fiduciary investment advice but clarifies that plan sponsors can continue to provide education without triggering fiduciary duties. Plan sponsors with more than $50 million in plan assets can continue to offer investment advice if certain conditions are met, and smaller plans can use best-interest contract exemptions.

Firms providing investment advice to plans must acknowledge in writing that they are acting as fiduciaries. Advisers can continue to receive common forms of compensation, as long as they put their clients’ best interest first and disclose conflicts of interest.

Mr. Perez stressed that DOL and White House officials went to great lengths to listen and respond to concerns raised by the retirement service industry and some members of Congress about whether a tougher standard would be too onerous and, ultimately, too expensive for lower-income savers.

“We listened, we learned, and we adjusted,” he said.

One of the biggest adjustments was giving advisers a full year to revamp their systems, up from a proposed eight-month implementation period. Compliance will be phased in through January 2018. The final rule also scrapped the idea of including a list of assets that would be covered.

The new rule allows best-interest contracts to be signed at the same time as other paperwork and only requires that existing customers be sent a notice of the new standard. The rule also clarifies that there is no bias against proprietary products offered by the parent firm of an adviser.

“I am quite confident that the industry will be able to comply,” said Mr. Perez, who acknowledged that a “small but boisterous minority will remain” opposed to a new standard.

Labor Department officials are scheduled to hold a briefing at 11:30 am EDT for a formal unveiling of the rule. The new rule is posted on the Federal Register.

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