Last month we brought you DOL Regulations, Part I: Who is a Fiduciary? It discussed the DOL’s latest attempt at redefining ERISA’s definition of “fiduciary” and who the proposed regulation identifies as a fiduciary. Now we will look at who is not a fiduciary.
The DOL carved out seven types of advice that will not cause the person who provides certain types of advice to be treated as a fiduciary. There are a total of seven carve-outs, as follows, each with its own rigorous conditions and requirements:
- The “Seller’s Carve-Out” covers recommendations to (a) plans with more than $100 million in assets and (b) certain plans with more than 100 participants in an arm’s-length transaction;
- Recommendations to enter into a swap or securities-based swap regulated under the Securities Exchange Act swap transactions;
- Employees of the plan sponsor who provide advice to the plan, so long as the employee does not receive additional compensation for providing the advice;
- Platform providers are not fiduciaries when they make available to a plan fiduciary a platform of investment alternatives to be selected for a participant-directed individual account plan;
- Selection and monitoring assistance by identifying investment alternatives that meet objective criteria specified by a plan fiduciary;
- Financial reports and valuations, including ESOP valuations and information required for reporting and disclosure requirements; and
- Investment or retirement education.
As mentioned at the outset, the regulations are currently in proposed form. The DOL has requested comments on various provisions of the proposal and will likely hold hearings as well. It is anticipated that the regulation will not be finalized and applicable for a significant amount of time, perhaps not until the beginning of 2017. It is also possible that the guidance in the proposed regulations will be changed before it is issued in final form. At this point in time, it is advisable for plan sponsors to be aware of the proposed changes and how they may affect agreements with existing and new consultants and advisers, as well as current investment education programs.