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DOL Delays Fiduciary Rule 60 Days

Kimberly Flett

The Department of Labor (DOL) delayed the fiduciary rule 60 days from April 10, 2017 to June 9, 2017. Although this postponement is in effect, plan sponsors, retirement plan investors and advisers should be aware of the important components of this rule and prepare for the outcome.

Plan sponsors are considered fiduciaries to a 403(b), 401(k) and other qualified plans. This is also expanded to investment advisers and anyone who provides investment advice or recommendations for a fee or other compensation. The new ruling means that financial advisers will continue to act in the best interests of their investors even more significantly than in the past.

Reasons for the rule include transparency for investors, fee-based investing and lower-cost investments. Clear communication must be provided to investors and, in particular, regarding how the adviser is getting paid. This puts more responsibility on the adviser, including:

  • documentation of recommendations to clients demonstrating why the recommendation is the client’s best interest;
  • building portfolios effectively suited for clients;
  • detailed and supportive back up of investment recommendations; and
  • creating proper educational materials.


In addition, technology must be compliant, ensuring that client’s needs are first and foremost. Records management, client risk tolerance, low-fee portfolios and best investment type are just some of the factors that must be aligned within technology systems.

The ruling affects retirement accounts which includes 401(k), IRA and other qualified funds.

Based on a memorandum from the Trump administration, the DOL should assess whether the rule would limit access to investment advice, create industry disruptions, and cause more lawsuits. The DOL said the delay was to “simply granting a flat delay of fiduciary status and all associated obligations for a protracted period.”

The delay for 60 days also impacted the full implementation of various prohibited transaction exemptions. The PTEs allow investment advice fiduciaries under the rule to continue to receive compensation that would otherwise violate the PTE rules.

Best Interest Contract Exemption and Principal Transaction Exemption will apply June 9. These will permit advisers and other providers to continue to receive compensation that will otherwise be prohibited provided compliance is made.

Many of the investment companies are already in gear for this change. Compliance items include an effective call center for participants, educational meetings, effective communications and notice in addition to the full disclosure of fees and providing adequately managed accounts.

Even though the applicability of the fiduciary rule is postponed, plan sponsors should ensure that their plans advisers are in compliance by inquiring and retaining support of compliance in their records. The delay will allow for sufficient time for further planning.

Kimberly Flett is Managing Director, National Practice Leader ERISA, STS Compensation and Benefits. 

Opinions expressed are those of the author, and do not necessarily reflect the views of NTSA or its members.