Some of us are retirement plan fiduciaries, and some of us do everything we can to keep from being a fiduciary! The Department of Labor (DOL) wants to clarify the line so it is clear to all parties whether or not they are serving in a fiduciary capacity. The DOL had proposed a comprehensive new definition, but they pulled the proposed regulation this week.
In general, it is a fiduciary’s responsibility to:
- have only the plan and the plan participants interests at heart when making decisions,
- develop and complete checklists for processes and procedures,
- have adequate insurance coverage,
- be suspicious and be a good detective, and
- question everything related to the plan.
There are three official types of retirement plan fiduciaries defined by the Employee Retirement Income Security Act (ERISA):
§3(21) defines the fiduciary as someone who:
- is a decision-maker for the plan, and
- exercises discretionary authority over the plan or plan assets.
§3(16) is defined as a full scope fiduciary, and includes the Plan Administrator or Plan Sponsor.
§3(38) defines the investment fiduciary as someone who:
- has power to manage, acquire or dispose of any plan asset,
- recommends or monitors investments or generates investment models or portfolios, and
- is typically a Registered Investment Advisor (RIA), as many broker-dealers do not allow their representatives to sign on as retirement plan fiduciaries.
The DOL had issued wide-ranging guidelines that pulled many advisors into the status of retirement plan fiduciaries. Those regulations were pulled after an outcry from many in the advisory community including broker-dealers. Watch for this issue to be simmering for a while!
