Recent efforts by the Department of Labor to clarify the fiduciary rule and delay some key provisions signal relief for retirement plan service providers, but potentially more work — and liability — for plan sponsors.
"I think the bottom line for plan sponsors is, the days where you could just ignore those kinds of (record-keeper) transactions are over," said Bill McClain, a Mercer LLC principal based in Seattle. "You need to know what's on the (service provider) website, listen in on a call. You as a plan sponsor should know what's going on there."
The new rule went into effect June 9 after a two-month delay, but provisions that apply to "best interest" contracts and other arrangements between investors and service providers are scheduled to take effect Jan. 1.
On Aug. 3, Department of Labor officials released a list of responses to frequently asked questions that addressed, among other things, what service providers have to disclose to plan sponsors about their fiduciary status, and when.
To streamline the transition to the new rule, the FAQs said providers don't have to specifically affirm they are fiduciaries, as long as they describe specific functions or take other steps to identify fiduciary activities, compensation and possible conflicts of interest.
Financial services groups opposed to the new rule were further encouraged Aug. 9, when the Labor Department asked the Office of Management and Budget for permission to delay the applicability date for the remaining portions of the rule until July 1, 2019.
"To some extent, plan sponsors are in limbo for this transition period. It's one thing to let things float along for six months, but two years is a long time," said Mr. McClain. "Two years from now, it might be something entirely different from what it is now."