How to get ready for a new definition of fiduciary

How to prepare for a new definition of fiduciary

By now you have probably heard that the DOL will announce changes to the definition of ‘fiduciary’ in early 2012. The purpose is to strike a balance between protecting consumer accounts from biased investment advice and allowing the securities industry to have enough ability to add value without excess regulation. Briefly, the anticipated revisions:

  1. Clarify that fiduciary advice is individualized advice directed to specific parties
  2. Clarify fee issues that allow for broker commissions without undue burden on plan participants
  3. Clarify the rules about conflict of interest when providing investment advice

Plan sponsors can prepare for the revised fiduciary definition by reviewing plan documents and making sure that the information is included that may need attention:

  1. Does the plan document clearly state investment advice relationships?
  2. Are fees that are currently part of the retirement plan structure clearly delineated?
  3. Are participants given choices that negate opportunities for conflict of interest?

When the new definition is announced, you will want to communicate with plan participants. Detail any impact the definition has on the structure of your plan.

For complete information about the proposed new definition of ‘fiduciary,’ see the DOL Web site.