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DOL Fiduciary Rule
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Five Steps Plan Sponsors Can Take Now to Prepare for Final DOL Fiduciary Ruling

While the Department of Labor’s recent fiduciary ruling was aimed primarily at retirement investment advisors, including consultants, broker/dealers, insurance agents and IRA providers, it contains plenty of directives that are keeping plan sponsors up at night. While their roles have not changed, the new rules do impact them; they just aren’t completely sure how.

All the players on a plan sponsor’s team—employees and the various service providers that are critical to plan operations—are equally concerned about their individual fiduciary responsibility under the newly expanded regulations. At this point, most don’t know where they stand. Can they still advise someone to move from a plan to an IRA? Can they help participants choose specific investments? Do they need to take new approaches to fee disclosure?

In the absence of full clarity, here is a suggested action plan to help plan sponsors begin the process of complying with the DOL’s new fiduciary rule.

Step 1: Know your service providers.

Just as financial advisors need to abide by the “know your customer” rule, plan sponsors need to make sure they thoroughly understand who their service providers are and what their service providers’ fiduciary requirements may be under the new ruling.

There are a number of intermediaries and service providers that support typical retirement plans, including:

  • Record keeper
  • Consultant
  • Retirement plan advisor
  • TPA
  • Attorney
  • Custodian

Step 2: Vet your vendors.

Plan sponsors should vet their vendors to make sure they are actively working toward complying with the new rules. They should be concerned with every service provider in their universe. For example, does their plan advisor(s) have prohibited transaction exemptions (PTEs) in place and are they valid? The plan sponsor is already a “fiduciary” under ERISA, but all service providers should be asked to explain what they are doing to address the new regulation if their fiduciary requirements have changed or increased.

In a recent RFI (request for information), my firm was asked to respond to a set of criteria we’ve never seen before. It brings this fuzzy situation into a bit more focus:

“Confirm your firm’s intention to (i) comply with the DOL’s definition of “fiduciary” as defined in DOL Reg. § 2510.3-21, comply with the DOL’s definition of “fiduciary” as re-defined by the Department on April 8, 2016 in DOL Reg. § 2510.3-21, (ii) comply with the Department’s “Best Interest Contract Exemption,” and (iii) continue to offer the products and service that are the subject of the RFI subsequent to April 10, 2017.”

Step 3: Drill down and ask what specific changes your service providers plan to make.

Under the new ruling, any advice provided about the movement of money in or out of the plan may be considered a recommendation. Consider this. Record keepers are a plan participant's direct contact for questions about their account. Among other things, they may contact a record keeper with questions about investment choices when they join, or for suggestions on how to deal with assets when rolling them out of the plan when they switch jobs and move assets to their new employer's plan. These questions and answers might fit into the DOL’s new definition of fiduciary.

A savvy plan sponsor will want to ask what process or procedures the record keeper in the above example has put in place to ensure fiduciary status does not occur, or if it occurs, what PTE the record keeper is relying upon to eliminate a violation of the fiduciary rule.

Step 4: Review responsibilities of current employees.

Employees who support the plan may find themselves making recommendations to the plan sponsor. Other employees may find themselves providing investment information to participants. These situations have been directly addressed by the new ruling. Plan sponsors need to evaluate the specific roles and responsibilities of their employees to make sure they are not stepping over the fiduciary line.

Step 5: Address education and communications.

In addition to the previous considerations, plan sponsors will need to distinguish between general education and investment advice as defined by the new fiduciary rule.

No matter who delivers educational materials or how often, communications that do not promote specific investments or distribution alternatives or focus on a particular participant’s individual situation will not be considered a fiduciary investment advice recommendation.

However, advisors or other service providers who consult with participants on rollovers to IRAs and roll-ins to a 401(k) plan need to make sure their recommendations are in the participant’s best interest with respect to fees and expenses. For example, they are going to want to avoid suggesting that an individual move money from a low-fee plan to a higher-fee IRA unless the recommendation is in compliance with the BICE.

Plan sponsors on the hot seat

The typical plan sponsor relies on its employees and a variety of service providers. The biggest concern of plan sponsors in this post–fiduciary rule world should be whether or not the actions of their employees and service providers expose the plan sponsor to additional compliance risks. Careful training, evaluation and monitoring can increase the odds of compliance with the new fiduciary rule.


Terry Dunne is Senior Vice President and Managing Director of Rollover Solutions Group at Millennium Trust Company, LLC. Mr. Dunne has over 35 years of extensive consulting experience in the financial services industry. Millennium Trust Company, LLC acts as a directed custodian and does not provide tax, legal or investment advice.


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