What 401k Plan Sponsors Want To Know About The New Fiduciary Regs

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PSI Newsletter and Website Header 10.2.15By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Since the Department of Labor released its final fiduciary compliance rules, there has been a tremendous amount of media coverage devoted to what plan sponsors need to know about the new fiduciary regs. Although much of it has been well written with good intentions, most of it has been wrong and has only served to confuse plan sponsors. Based on what I am hearing from plan sponsors, following is what you say you want to know about the new fiduciary regs:

1. Have my fiduciary responsibilities changed?

Your company is still a fiduciary to your 401k plan and always will be. There is nothing that can be done to change that. You can welcome more fiduciaries into your fiduciary boat, but you can’t climb out. The new fiduciary regs have absolutely nothing to do with your fiduciary responsibility. There is nothing you are required to do as a result of these final regulations.

2. Do I need to worry about the final regulation compliance dates?

Compliance with the regs is required by January 1, 2018. This date is not important to plan sponsors. You don’t have to have anything completed by that date. It is not your responsibility to make sure your investment advisor’s firm is complying with the new regs by this date.

3. Are these new fiduciary regs bad for 401k plans?

Everything bad you heard about these fiduciary regs is wrong. There is no downside to your 401k plan investment advisor being required to share recommendations with you that are in your best interest, which is what being a fiduciary entails. The middle class or small employers are not going to lose their ability to receive investment advice. All of these comments were political bluster and were never grounded in any real facts.

4. I heard that these regs are the Obamacare of the retirement plan industry. Is that true?

More nonsense from the brokerage lobby that was never true. If the brokerage industry decides not to provide investment advice because of compliance costs associated with the final fiduciary regulations, there are plenty of Registered Investment Advisory (RIAs) firms already providing these services at competitive rates that you can work with.

5. I have heard these regs will be repealed, just like the ACA. Is that likely?

No, just like the Affordable Care Act (Obamacare), these final fiduciary regs will NOT be repealed. They are here to stay.

6. Is my investment advisor impacted?

Ask. If your investment advisor responds by saying, “I work for a RIA and have always been a fiduciary to your plan”, you are done. Forget about it. RIAs have been and will continue to be fiduciaries with regard to 401k plans. If your investment advisor works for a brokerage firm, there is good news here for you. His/her firm has likely not been acting as a fiduciary to your plan, but will now be required to.

7. Is there something I need to do if my investment advisor works for a brokerage firm?

You will need to decide whether you are comfortable with the type of fiduciary services you are going to receive from your broker’s firm in comparison to what you could receive from a RIA. There are exceptions that have been engineered into the regulations for brokerage firms. You should evaluate and determine whether these exceptions are meaningful to you.

There is much less to these new fiduciary regs for plan sponsors than has been reported. Everything here is good news for you and probably does not require any of your time or effort.

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About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or bob@lawtonrpc.com.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at: http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.