The DOL fiduciary regulatory package invalidated
On June 21, 2018, the Fifth Circuit Court of Appeals officially reversed the judgment of the district court in favor of the Department of Labor (DOL) and struck down, in its entirety, the DOL’s fiduciary regulatory package.
The ruling invalidates all elements of the regulatory package, including the broadened definition of fiduciary investment advice, the changes made to prohibited transaction exemptions in existence prior to the regulatory package, and the Best Interest Contract Exemption. We return to the ERISA five-part test to defining fiduciary advice.
Does this change how we interact with you?
We’ll continue to operate in accordance with the rules of engagement set forth by your broker-dealer (BD) or registered invesetment adviser (RIA). You’ll want to check with your BD or RIA to confirm your fiduciary status and how this changes impacts you and your relationship with your clients.
We’ll continue to provide robust investment support, information and education to you and your plan sponsor clients. The type of investment support we provide no longer depends on your status or your client’s as an Independent Fiduciary under the DOL fiduciary rule. We’ll provide investment support under the previous DOL rules and guidance.
What does this mean for the support Principal® provides plan sponsors and their participants?
All regulatory rules and guidance in place prior to the fiduciary regulation become applicable once again. This includes pre-existing DOL guidance establishing that conversations with participants or beneficiaries about their retirement account decisions at a benefit event are educational in nature as long as the individual is not otherwise providing a fiduciary recommendation to the plan or participants.
The primary exemption, the Best Interest Contract Exemption, that allowed us to take a fiduciary role for benefit event advice is invalidated. Our teams who provide assistance to participants and beneficiaries regarding their benefit event decisions will no longer operate as fiduciaries. We’ll continue to provide participants with education and assistance regarding their benefit event decisions.
And, we’ll continue to educate participants when they reach out to our call center. We’ll have point-in-time discussions to help identify a participant’s need and discuss options with them to help meet their needs.
The support that we provide the plan sponsor regarding plan and investment changes won’t change.
Talk to your broker-dealer or registered investment adviser to confirm your fiduciary status and how this ruling impacts you and your relationship with your clients.
Want more info?
For more details on the invalidation of the rule check out:
- Compliance News June 2018 — DOL Final Fiduciary Regulation Package Vacated Part 2
- Compliance Newsletter June 2018 — DOL Fiduciary Regulation Package Update
- Compliance News March 2018 — Department of Labor Final Fiduciary Regulation Package Vacated
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax or accounting obligations and requirements.
Principal Financial Advisors, Inc. is a registered investment adviser and member company of the Principal Financial Group®. Registration does not imply any specific level of skill or training.
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