DOL Fiduciary Regulations

April 22, 2016

The U.S. Department of Labor (DOL) earlier this month released final regulations which significantly expand the more than 40-year-old definition of who is a plan fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) by virtue of providing investment advice for a fee. Thus the final regulations close the door on the spirited, six year debate between the DOL and the investment community over the challenges that the members of the investment community will face if the definition is expanded. However, there was during this period virtually no discussion about the challenges a plan sponsor would face if the definition is expanded.

Sort Through Challenges 

Plan sponsors will need to sort through which service providers will be “fiduciaries” for their plans under the final regulations and how to deal with their change from non-fiduciary to fiduciary status, including how to deal with the risk of “co-fiduciary” liability under ERISA with respect to any breach by those providers of their fiduciary duties.

The expanded definition will be effective on June 7, 2016, meaning no changes can be made after that date to the definition without additional public notice and comment, but the compliance deadline is April 10, 2017, subject to some additional transition relief which runs to January 1, 2018.

Plan Sponsors with ESOPs

Finally, we note that the final regulations (unlike the proposed regulations) do not address the fiduciary status under ERISA of firms which provide appraisals and fairness opinions but that the DOL in the preamble to the final regulations states that the final regulations might be expanded in the future to cover those firms.

If you have any questions please contact Donald S. Kohla at 678.336.7140 or Jan G. Marsh at 678.336.7135.

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