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Monday, 18 April 2016 12:00

Final DOL Rule Dramatically Changes Relationship Between Advisors and Employers

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Guest Article by Kristen Deevy, Strategic Retirement Partners

The long wait it over! The Department of Labor (DOL) has finalized its Conflict of Interest rule. The question is “Did you know you were waiting for it?” As an employer you may not have heard about this new regulation, but your financial advisors have!

The DOL rule will dramatically affect how advisors and their broker dealer or Registered Investment Advisor (RIA) firms interact with employers who sponsor ERISA retirement plans and their plan participants, especially for IRA rollovers. Most of the rule’s provisions will go into effect in April 2017 while others go online in January 2018.

Guest Article by Kristen Deevy, Strategic Retirement Partners

The long wait it over! The Department of Labor (DOL) has finalized its Conflict of Interest rule. The question is “Did you know you were waiting for it?” As an employer you may not have heard about this new regulation, but your financial advisors have!

The DOL rule will dramatically affect how advisors and their broker dealer or Registered Investment Advisor (RIA) firms interact with employers who sponsor ERISA retirement plans and their plan participants, especially for IRA rollovers. Most of the rule’s provisions will go into effect in April 2017 while others go online in January 2018.

Employers will likely have to adjust their working relationships with their retirement advisors and investment firms, as well as with service providers and record keepers. They will have to be especially mindful of how these providers are interacting with their plan participants. Because we live in a litigious society, lawyers who have been emboldened by recent successes in 401(k) lawsuits, are bound to carefully review the new rule and look for opportunities.  

According to a report in the National Association of Plan Advisors:

The rule and exemptions ensure that advisors are held accountable to their clients if they provide advice that is not in their clients’ best interest. If advisors and firms do not adhere to the standards established in the exemption, retirement investors will be able to hold them accountable — either through a breach of contract claim (for IRAs and other non-ERISA plans) or under the provisions of ERISA (for ERISA plans and participants).

The key for employers is to determine if their plan’s advisor is acting as a plan co-fiduciary and to understand how that advisor is working with their plan participants. If the plan advisor is not qualified to be a co-fiduciary and is not discharging their duties properly, plan sponsors could be at risk. Now it’s even more important to make sure that fees are reasonable based on the services provided by the advisors and their firms. If the advisor works with a plan participant, either in the plan or through an IRA rollover, and is not acting in the best interests of the participant, employers who hired that advisor may be held liable.

But even if an advisor is willing to act as a co-fiduciary, the question should be asked whether they have sufficient assets and insurance to pay a legal judgement. If they do not, then employers have no recourse and may be left “holding the bag” on suits filed on behalf of the plan participants against that advisor.

I had the honor of being invited to Capitol Hill to listen and advise top Congressional leaders about the future of the retirement savings industry in September 2015. While many people think not much gets done in Washington, I was encouraged to find that the specific recommendations made to the Department of Labor were heard and actually implemented! Specifically, clarification was issued regarding plan education activities that will (and will not) create a fiduciary relationship with your employees and plan participants. Additionally, employers were granted a more gradual implementation period to comply with the new regulations.

In summary, here are some questions you should pose to your current retirement advisor:

  • Are you signed on as a fiduciary to our retirement plan today? If not, will your answer change under the new DOL regulation? 
  • Do you have any conflicts of interest? Are they disclosed? 
  • Do your advisor fees fit the definition of “fair and reasonable?” In order to determine that, can you benchmark your services and fees in relationship to other firms?
  • As my advisor, are you a retirement plan specialist? Do you have the resources and insurance to support or avoid a legal battle?

The answers provided to these four questions will highlight where you could be at risk.

A final note: the fiduciary regulation cautions that it is important to emphasize that under ERISA, the employer has the obligation to monitor plan service providers, third party administrators, and advisors.  The DOL's conflict of interest final rule is intended to protect investors by requiring all who provide retirement investment advice to plans and IRAs to abide by a "fiduciary standard.” The intent is for these providers to put their clients' best interests before their own profits. This final rule fulfills the DOL's mission to protect, educate, and empower Americans as they face important choices in saving for retirement in IRAs and employer-sponsored benefit plans.

Kristen Deevy is the Managing Director of Strategic Retirement Partners, a national retirement consulting firm dedicated to providing guidance in decision-making and problem solving to employers and sponsors of retirement plans. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or 888.202.3927 x710.

Read 7914 times Last modified on Friday, 29 April 2016 17:17
Kristen Russell

Kristen founded Fall River Employee Benefits as the culmination of her insurance industry career as an actuary, underwriting executive & consultant. As an Assistant Vice President at Great-West Healthcare (now part of CIGNA), she managed a $1 Billion block of health insurance. She also worked as a Senior Consultant at Reden & Anders, consulting to insurance companies and large employers throughout the country. Ms. Russell received a Bachelor of Science, Business Administration in Actuarial Science, is a member of the American Academy of Actuaries and achieved Fellowship in the Society of Actuaries through a rigorous nine-year series of exams.

Kristen grew up in Iowa but has lived in Colorado since 1993, currently living near our office in the Lower Highlands neighborhood near downtown Denver.  She enjoys bicycling, hiking, traveling and has a special passion for non-profit volunteering. She is married to an incredibly talented photojournalist, has two adult stepdaughters and an adorable Border Collie/Lab mix named Chaco.