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Fiduciary duties of trustees, directors, others

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[Discussion] Can One Retirement Plan Loan Money to Another Retirement Plan?
"Employer has two retirement plans. Can one plan lend money to the other as an investment? (DB Plan wants to lend to PS Plan so that the PS plan then has funds to use to make an investment in a parcel of land. We'd rather not have the DB plan make the investment directly, due to annual valuation issues for the parcel.)" (BenefitsLink Message Boards)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 44
"For the rest of this year -- the 'transition period'-- most firms will use the Best Interest Contract Exemption.... Transition BICE requires that the entity and the adviser only comply with the Impartial Conduct Standards (ICS) [which] has 3 components: the best interest standard of care, only reasonable compensation, and no materially misleading statements. In effect the best interest standard of care brings the ERISA prudent man rule and duty of loyalty to IRAs. As a result, advisers and their supervisory entities need to educate themselves on the requirements of a prudent process with a duty of loyalty to the IRA owner." (
Advisory Firm Dodges ERISA Suit Against BB&T
"In the underlying complaint, the advisory firm was lumped together with the plan sponsor/recordkeeper and accused of permitting fiduciary breaches under ERISA.... The court concluded 'there are no facts alleged that as to the particular breaches of fiduciary duty alleged, Cardinal did any specific thing.... [T]he plaintiffs have essentially alleged nothing more than that Cardinal gave BB&T general investment advice.' " (planadviser)
401(k) Plan Fees: The Wrong Choices Could Land You in Court
"Before determining if their plan fees are reasonable, employers need to ... answer a number of critical questions including: [1] What am I buying? [2] How much does it cost (investment, administrative and advisory services)? [3] Who is going to pay (participants and employers)? [4] How are they going to pay? [5] What model is best for us?" (CFO Daily News)
401(k) Fiduciaries: Is It Time to Hone Your Processes? Part One
"The litigation has widened and deepened the scope of the threat. Processes, as good as they have been in the past, may not be good enough now. Something more may be required that requires plan sponsors to look at a hard look at their existing practices and to improve them if necessary." (Fiduciary Plan Governance, LLC)
[Guidance Overview] DOL Charts a New Course for ERISA's Fiduciary Rule
"[C]ompliance with the Fiduciary Rule and the related PTEs is generally not required until June 9, 2017.... Compliance with the remaining conditions of the [BIC Exemption] and with the amendments to [PTE 84-24] ... will not be required until January 1, 2018.... [A chart] provides a high-level summary and timeline of the applicability of the various aspects of the fiduciary rulemaking, and identifies a few discrete issues that industry participants might consider in anticipation of the June 9 applicability date[.]" (Dechert)
As DOL Fiduciary Rule Stalls, Acting SEC Chairman Seeks to Have Agency Step In
"An outspoken critic of the [DOL's] fiduciary duty rule, [acting SEC Chairman Michael Piwowar] expressed support for the implementation delay that recently went into effect while the DOL re-evaluates the regulation ... Mr. Piwowar said that determining advice requirements is the SEC's job, the same point made by financial industry opponents of the DOL rule." (Pensions & Investments)
[Opinion] SPARK Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "[T]he Regulation will prevent smaller plans and individual investors from receiving beneficial products and services that are currently made available to them by retirement industry service providers.... [The] overly broad definition of fiduciary investment advice, restrictive carve-outs, and unnecessarily burdensome requirements for satisfying the BICE will cause an increase in litigation, and an increase in the price that investors and retirees must pay to gain access to retirement services." (The SPARK Institute)
[Opinion] Setting a Fiduciary Standard That Puts Investors First: Problems with the DOL Rule
"[1] The current implementation plan calls for a piecemeal rollout of provisions.... [A] full review of the rule should be completed before any one element is made final.... [2] The rule currently defines 'investment advice' in broad terms. This sweeping definition brings with it regulatory requirements that are in some instances sensible but in many cases unnecessary.... [3] [T]he rule makes unnecessary distinctions between how advice is delivered ... the topic of advice ... and the type of client ... This fragmented approach is confusing, and will ultimately increase the complexity and cost of advice." (Vanguard)
Interesting Angles on the DOL's Fiduciary Rule, Part 43
"[W]hile the explicit compensation requirement of the [Impartial Conduct Standards] is that advisers and Financial Institutions cannot receive more than reasonable compensation, the DOL is saying that a Financial Institution's compensation structures cannot promote investment recommendations that are not in the best interest of the investor.... One possible interpretation is that, even though the compensation of the adviser can vary, both for similar products (e.g., mutual funds) and among product categories (e.g., mutual funds vs. variable annuities), the variation cannot be so great as to unreasonably promote advice that is inconsistent with the best interest standard of care." (
[Opinion] ACLI Comment Letter to DOL on Examination of the Final Fiduciary Rule
50 pages. "The Regulation dislocates and disrupts consumer access to retirement products and services. It has begun to create an advice gap with the abandonment by service providers of small and medium retirement account holders while, without substantiation, the [DOL] relies on computer generated asset allocation platforms (a.k.a. Robo-Advisers) as the option for small investors who lose access to financial assistance." (American Council of Life Insurers [ACLI])
[Opinion] IRI Calls on DOL to Delay Entire Fiduciary Rule, Establish Workable Alternative
Requiring all financial professionals to operate as ERISA fiduciaries is inconsistent with the statutory text of ERISA and will cause significant dislocations or disruptions within the retirement services industry.... In adopting the Rule, the Department failed to adequately consider ... the Rule's impact on retirement savers' access to financial assistance, products and services; job losses likely to result from the Rule; the Rule's adverse impact on annuities; viable alternatives to the Rule; and comments provided by other regulators." (Insured Retirement Institute [IRI])
[Opinion] To Protect Retirement Savers, House Committee Members Urge DOL to Further Delay Flawed Fiduciary Rule
"Republican members of the House Committee on Education and the Workforce ... are urging the [DOL] to further delay implementation of the fiduciary rule, which would force low- and middle-income families to pay more for retirement advice and make it harder for small businesses to offer their workers retirement options.... The members expressed concerns over the accuracy of the Obama administration's analysis of its rule[.]" (Committee on Education and the Workforce, U.S. House of Representatives)
[Opinion] Market Synergy Group Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
35 pages. "The rule should be withdrawn in its entirety. It is anathema to the Administration's articulated policies ... [A]ny potential gains to retirement investors that the rule supposedly would achieve have been overstated. The Department's earlier estimates of potential investor gains were based on outdated, methodologically flawed data, extrapolations, and assumptions." (Market Synergy Group, Inc.)
[Opinion] DCIIA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
"[DCIIA] members have reported sightings of billboard signs soliciting plaintiffs only by reason of their participating in a 401(k) plan and have witnessed broad-scale social media campaigns to solicit 401(k) plan plaintiffs.... DCIIA requests that the [DOL] conduct research to examine the impact of increased litigation on promoting innovation and the successful implementation of defined contribution plans ... [including] an assessment of potential harm to plan participants resulting from lack of access to products and services that can improve their ability to save effectively for retirement but that plan fiduciaries may be reluctant to offer due to the potential threat of litigation." (Defined Contribution Institutional Investment Association [DCIIA])
[Opinion] TIAA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "Recommendations concerning subsequent investment or use of Required Minimum Distributions (RMD) payments should not be fiduciary advice.... The education exclusion should be expanded to include a service provider's recommendations about enrolling in or contributing to a plan ... The definition of 'Best Interest' should mirror ERISA's 'prudent man standard of care' under ERISA Section 404(a) for all retirement investors.... The BIC Exemption should be expanded to accommodate advice to participants of the advice provider's own employer sponsored plans." (TIAA)
District Court Awards ESOP $9.4 Million After Fiduciary Caused Participants to Overpay for Company Stock
"A federal judge, presiding over a U.S. [DOL] lawsuit, has found that First Bankers Trust Services Inc. breached its duties of prudence and loyalty to the participants of an [ESOP] when it caused the plan to overpay for shares of the company's stock.... [The judge] awarded to the plan $9,485,000 (plus interest), subject to the reduction in a 2016 consent order against SJP Group Inc.'s CEO Vincent DiPano. SJP Group, the plan's sponsor, hired First Bankers as an independent fiduciary to advise the company's plan on whether, and at what price, to purchase company stock from its majority shareholder DiPano." [Perez v. First Bankers Trust Serv. Inc., No. 12-4450 (D.N.J. Mar. 31, 2017)] (PLANSPONSOR)
[Opinion] ICI Comment Letter to DOL on Proposed Re-Examination of Fiduciary Rule (PDF)
50 pages. "The final rule was developed based on a faulty and incomplete regulatory impact analysis, is excessively convoluted, and -- without significant revision -- will harm the very individuals it was designed to protect. More urgently, the Department must extend the compliance date for the rule to avoid very serious disruption and harm to retirement savers." (Investment Company Institute [ICI])
Fear of Litigation Looms Over DC Plans
"A quarter of DC consultants surveyed ... rated avoiding fiduciary lawsuits as the most important consideration of their clients, compared with 29 percent who chose retirement outcomes. Of these consultants, who collectively advise on more than $4 trillion in DC assets, 84 percent recommended that clients compare plan costs with those of peers as one way to manage fiduciary risk. Another 55 percent said plan sponsors should avoid funds that charge performance fees." (Institutional Investor)
[Opinion] SIFMA Comment Letter to DOL on Proposed Delay and Reconsideration of Fiduciary Rule
128 pages. "[T]he path chosen by the former Administration has proven to be impractical, unworkable, unrealistic and therefore, unlikely to lead to better financial results for retirement savers.... [1] It limits products and services and makes both more costly to retirement investors. [2] It has disrupted the industry in such a way that millions of retirement savers will be unable to purchase lifetime income options ... [3] The exemptions' reliance on private plaintiffs to enforce the Rule significantly increases the probability of meritless litigation and will likely lead to even further increases to the costs of products and services[.]" (Securities Industry and Financial Markets Association [SIFMA])
[Opinion] American Retirement Association Comment Letter to DOL on Fiduciary Rule (PDF)
"The ARA recommends that [1] the definition of Level Fee in the Best Interest Contract Exemption [BICE] be clarified to permit a Level Fee Fiduciary to receive transaction-based compensation under an offset arrangement that falls within the parameters of Advisory Opinion 97-15A.... [2] the Department revise [BICE] to eliminate the costly, inefficient and inconsistent enforcement mechanism of class action litigation.... [3] the applicability date for the Regulation be delayed until January 1, 2018... and that ultimately, a transition period of at least 24 months from the date a revised exemption (or rule) is promulgated should be provided." (American Retirement Association [ARA])
[Opinion] U.S. Chamber of Commerce Comment Letter to DOL on the Economic Impact of the Fiduciary Rule and Associated Exemptions (PDF)
30 pages. "[T]he Department never appropriately considered the effects of the Fiduciary Rule on the fiduciary insurance marketplace.... The Fiduciary Rule's policies were not well coordinated with ... other regulators -- indeed; several offered very critical public comments during the rulemaking process, objecting to the proposed Fiduciary Rule.... New empirical evidence from real-world efforts to implement the rule show Department predictions to be wrong, understating costs and overstating benefits." (U.S. Chamber of Commerce)
[Opinion] Morningstar Comment Letter to DOL on Fiduciary Rule
16 pages. "[Morningstar has] estimated ... possible expenses from class action lawsuits stemming from [BICE[ ranging from approximately $70 million to $150 million annually.... One potential alternative would be for financial institutions to agree to operate under certain uniform prudence standards, including submitting certain data elements to demonstrate compliance with the prudence standard.... [An] auditable big-data system provided by a neutral third party for reviewing individual portfolios across a firm, as well as the reasons advisors recommended rollovers to IRAs and in support of advice within IRAs, could substitute for [BICE] while still protecting investors.... [S]uch a uniform prudence standard and data assembly system will likely be developed in any case to help firms defend against lawsuits." (Morningstar)
Sharp Attention Needed to Interpret Retirement Plan Fee Data
"Even with huge amounts of data available, there is not very much simple or straightforward about retirement plan fee benchmarking.... Perhaps even more helpful to plan sponsors and participants than the massive amounts of raw data on their own product choices is the increased prevalence of third-party fee comparison studies, which aggregate and benchmark information from broad pools of retirement plans and investment providers." (PLANSPONSOR)
Fiduciary Rule Comments Due Today
"All public comments on the controversial [DOL] fiduciary rule must be filed by 11:59 p.m. Monday [April 17].... [This] deadline is [for comments] on the substance of the rule and the directive set forth by President Donald J. Trump.... Evidence indicates the DOL takes the feedback seriously. The agency has indicated it will remain open to helpful comments even after the deadline." (
DOL Faces Tough Road in Revising or Repealing Fiduciary Rule
"If the agency makes changes -- as the Feb. 3 directive from President Donald J. Trump seems to foreshadow -- it could generate lawsuits from proponents. But the DOL will not get the same benefit of the doubt from the courts in that round of lawsuits that it has in current litigation brought by opponents of the rule." (InvestmentNews)
[Opinion] June 9, 2017 Dawning: Strict Fiduciary Obligations to Arise?
"At least for IRA accounts, salespeople will become fiduciaries.... Broker-dealer firms will diverge in their approaches to the rule.... Advisers will increasingly shift from one firm to another. Many of the older advisers, who want to try to remain as salespeople and who don't want to become true fiduciaries, will migrate to firms that will utilize BICE and the other PTEs.... Then, new advisers in firms that request the advisers to use BICE and the other PTEs, rather than level compensation, will eventually wise up and depart for a purer fiduciary pasture." (Ron A. Rhoades, JD, CFP)
DOL Backs Off Longtime 401(k) Policy Priority
"During the past five years, the DOL has filed friend-of-the-court briefs in every federal appeals court case asking whether a 401(k) plan service provider can be liable as a fiduciary under [ERISA]. The DOL this week declined to do the same in a case against Transamerica Life Insurance Co. that's pending in the U.S. Court of Appeals for the Ninth Circuit. While this move could signal a shift in DOL enforcement priorities in the Trump administration, it also could be read as a natural byproduct of a federal agency lacking top leadership following a presidential transition[.]" (Bloomberg BNA)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 42
"The only clear guidance from the DOL about what information needs to be gathered and evaluated is found in Q14 in the DOL's Conflict of Interest FAQs ... Basically, the information includes the investments, expenses and services in the plan and the proposed IRA. But at the end of the FAQ, the DOL explains that those considerations must be evaluated even if the adviser is using regular BIC (as opposed to the Level Fee Fiduciary provision). Accordingly, any fiduciary seeking to meet the best interest standard (in order to satisfy transition BIC) would engage in a prudent analysis of this information before recommending that an investor roll over plan assets to an IRA, regardless of whether the fiduciary was a 'level fee' fiduciary or a fiduciary complying with BIC." (
Fintech Firms Still See a Future for Fiduciary Compliance Tools
"[A] portfolio construction platform, is just one of dozens of fintech firms that began promoting their tools to advisers last summer, aiming to capitalize on compliance requirements the rule would demand.... [F]intech heads defend their strategy, arguing that just because the rule may end up derailed, the need for advisers to upgrade their technology and be open with clients doesn't go away.... [W]hile firms may have to tweak their messaging, the DOL rule has created client awareness and demand." (Financial Planning)
[Opinion] United Airlines and the Fiduciary Paradox: Providing a Margin of Excellence
"When regulators become heavy-handed with complex or numerous rules, the result is a desensitization of our Moral Aspiration. More rules actually diminish our desire to want to act in the best interests of others, and often the result is mediocrity, or worse, as in the case of United Airlines.... If our objective is to provide those we serve a margin of excellence, we need to convince regulators that more rules will not translate into better outcomes. In turn, we need to accept responsibility to educate and inform fiduciaries of the leadership and stewardship behaviors that will amplify and improve their governance procedures." (Don Trone, via
Help Contain Costs with a Benefit Claims Audit
"The plan sponsor ... has a fiduciary responsibility to regularly and proactively monitor the performance of its TPA ... A claims audit helps ensure the plan sponsor is protected.... During the audit process, a TPA is examined for its performance according to the contract and industry standards." (Moss Adams LLP)
Charles Schwab Seeks to Arbitrate 401(k) Investment Case
"Charles Schwab Corp. urged a federal court to order a former employee challenging the investment options in the company's 401(k) plan to submit his claims to individual, non-class arbitration ... The plan documents required participants to submit any claims arising out of or related to the plan to binding arbitration in a non-class basis, Charles Schwab alleged ... Schwab ... may be one of the first financial companies facing an ERISA lawsuit over its use of in-house funds in which the claims move to arbitration." (Bloomberg BNA)
[Guidance Overview] DOL Fiduciary Rule: Slowed Down, But Not Out
"Firms that intend to rely on PTE 86-128 for discretionary transactions will need to make sure that IRAs receive the disclosures that were previously required only for [ERISA] plans as of June 9. Further, if a firm was relying on PTE 86-128 to cover compensation that will no longer be covered on June 9, the firm will need to consider whether another exemption is available (e.g., the BIC Exemption for nondiscretionary advice) or whether its compensation arrangements otherwise need to be restructured." (Morgan Lewis)
[Opinion] Fiduciary Rule: Vanguard's View on DOL Delay
"Vanguard agrees a delay will provide a helpful opportunity for the DOL to review the rule's scope and other issues that may limit investor access to investment advice ... Regardless of whether the DOL ultimately decides to modify the rule in any respect, [Vanguard is] concerned that this piecemeal implementation may increase the cost of compliance and reduce investor access to investment advice, information, and education." (Vanguard)
DOL Not Backing Down From Fiduciary Rule
"It was thought by some analysts that the DOL would continue to delay the rule while it worked to dismantle some of the unpopular aspects. Instead, it seems the only positive result is more time to comply with the rules Those firms who do qualify as financial institutions under the BICE will be able to choose between PTE 84-24 and a transitional BICE -- when recommending all types of annuities -- until Jan. 1, 2018." (
[Opinion] Many IRA Contracts Include Impartial Conduct Standards as an 'Implied Term'
"[T]he absence of a express term in the contract that the Impartial Conduct Standards are to be adhered to does not means that the parties to the contract cannot enforce the Impartial Conduct Standards. Rather, the Impartial Conduct Standards become implied terms of every new IRA account agreement (or IRA annuity contract) entered into on or after June 9, 2017, and become applicable to existing IRA account agreements when transactions are undertaken that remove the arrangement from grandfathered status." (Ron A. Rhoades, JD, CFP)
Cliffs Natural Resources Beats ERISA Challenge to Stock Drop
"The lawsuit against Cliffs involved two scenarios ... The first is when stock price plummets and investors claim that public information about the company's struggles demonstrated that the stock was a bad investment. The second is when investors learn that the company's stock was artificially inflated and corporate executives had inside knowledge of corporate fraud that caused the inflation.... The Cliffs employees raised claims based on both public and inside information. The Sixth Circuit rejected both under Dudenhoeffer." [Saumer v. Cliffs Natural Resources, No. 16-3449 (6th Cir. Apr. 7, 2017)] (Bloomberg BNA)
[Guidance Overview] DOL Delays Fiduciary Rule and Eases Compliance
"Compliance with certain contentious provisions of the PTEs will be delayed until January 1, 2018.... During this grace period, investment advice fiduciaries will be required only to adhere to what the DOL guidance defines as the 'impartial conduct standard.' This standard requires investment advice fiduciaries to interact with retirement savers by making only recommendations that are in the retirement investor's best interest, avoiding misleading statements, and charging no more than reasonable amounts for investment advisory services." (Ascensus)
BlackRock Accused of Self-Dealing with 401(k) Plan
"The proposed class action ... alleges that participants in the 401(k) plan were subjected to higher hidden fees through excessive fund layering, where one BlackRock fund invested in a 'rabbit hole' of other BlackRock funds.... [T]he lawsuit ... alleges that the fees plus the poorly performing funds have caused participants to lose $60 million in retirement savings. The plan has more than 9,700 participants." (Bloomberg BNA)
Fifth Circuit Denies Emergency Injunction to Stop DOL Fiduciary Rule
"The Fifth Circuit Court of Appeals in New Orleans denied a request for a preliminary injunction against the regulation that was filed by several industry interest groups. The three-judge panel also denied the plaintiffs' motion for an expedited appeal of the case.... The plaintiffs include the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable and the U.S. Chamber of Commerce." (InvestmentNews)
Text of District Court Opinion Rejecting Use of Vanguard's Fees to Determine Reasonableness of Proprietary Investment Fund's Fees (PDF)
"Plaintiffs rely on [an expert's comparison of] Putnam mutual funds' average fees to Vanguard passively-managed index funds' average fees.... Vanguard is a low-cost mutual fund provider operating index funds 'at-cost.' ... Putnam mutual funds operate for profit and include both index and actively managed investment. [The] analysis thus compares apples and oranges. Moreover ... the Plaintiffs cite no relevant case law holding that such ranges or averages are unreasonable as matter of law." [Brotherston v. Putnam Investments, Inc., No. 15-13825 (D. Mass. Mar. 30, 2017)] (U.S. District Court for the District of Massachusetts)
Judge in Putnam 401(k) Suit Deals Potential Setback to Use of Vanguard as Fee Benchmark
"Similar self-dealing lawsuits against fund managers have proliferated of late, often using Vanguard and other recognized indexers as a barometer of acceptable low-cost funds for a 401(k) plan. This Putnam ruling ... points to a potentially difficult road ahead for plaintiffs[.]" [Brotherston v. Putnam Investments, Inc., No. 15-13825 (D. Mass. Mar. 30, 2017)] (InvestmentNews)
[Guidance Overview] Fiduciary Rule Delayed -- But It's Not Entirely What Was Expected
"[T]he delay means the 'old' rules will apply to the sale of investments (including insurance and annuities) and investment-related services to IRAs and ERISA-governed plans for another 60 days. This also means that -- until June 9, 2017 -- many firms and advisers will not be classified as fiduciaries and will not need to comply with a prohibited transaction exemption to do business. The relief provided under PTE 84-24, although temporary, is also significant.... In effect, the DOL is confirming that the new definition of fiduciary advice and the 'Best Interest' standard of conduct (and other Impartial Conduct Standards) will apply on and after June 9, even as it completes its review of the Rule and decides how to proceed." (Drinker Biddle)
Fiduciary vs. Investment Manager: What's the Difference?
"In an environment of increased fiduciary litigation, advisors and other service providers have ramped up their marketing efforts to provide risk management services to plan sponsors. Such efforts have resulted in plan sponsor confusion as to the type of services that are being offered, as well as the type of services that are preferable (e.g., is it better to engage a 3(21) fiduciary, or a 3(38) investment manager?). This [article] will attempt to get past all of the marketing hype so that plan sponsors can make productive decisions in this area." (Cammack Retirement Group)
[Guidance Overview] DOL Announces 60-Day Delay to Fiduciary Rule and Exemptions and Makes Significant Changes to Transition Period Compliance
"[T]he DOL's approach incorporates a 60-day delay of the applicability date of the Fiduciary Rule and related exemptions and a significant reduction in compliance burdens during the new transition period ... This approach essentially eliminates the need for transition agreements, disclosures, and certain structural changes (such as the appointment of a BICE officer) that were formerly required to be in place on the applicability date." (The Wagner Law Group)
[Guidance Overview] DOL Fiduciary Rule Delayed, But Parts Might Be Here to Stay
"In addition to the general 60-day delay, the Department has delayed most of the requirements for the best interest contract and other new exemptions through January 1, 2018. In setting separate applicability dates, the Department distinguished between [1] the rule on fiduciary status (who is a fiduciary) and the 'Impartial Conduct' standard (acting in the client's best interest), and [2] the more onerous requirements of the various exemptions. The Department hinted that it might let the rule on fiduciary status and the Impartial Conduct standard go into effect as early as June 9." (Proskauer's ERISA Practice Center)
'Poof, It's Gone!' DOL Quietly Strips Two Heavy Lifts from the Fiduciary Rule as It Makes Delay Official
"In a move that took even seasoned ERISA attorneys by surprise, the [DOL] extracted the teeth from the fiduciary rule until Jan. 1, 2018. In making official its 60-day delay until June 9, the DOL eliminated its two most stringent requirements -- namely the need to declare fiduciary status to clients and the associated need to disclose specific conflicts of interest." (RIABiz)
[Guidance Overview] DOL Releases Final Extension of Fiduciary Rule Applicability Date (PDF)
"Because the Fiduciary Rule will be applicable prior to the completion of the analysis required by the President's Memorandum, DOL may be able to take the position that the retirement services industry is able to comply with the Fiduciary Rule. Additionally, because there is no delay to the end of the Transition Period from January 1, 2018, DOL may be able to argue that making changes to the Fiduciary Rule or related exemptions would drive up compliance costs at no industry savings. That is, by January 1, 2018, the financial services industry will be expected to have finished spending the $5 billion in anticipated start-up costs." (Groom Law Group)
Fee Study of 525 401(k) Financial Advisors Shows Why Trump Can't Reverse Tide of Fiduciary Advice
"Even if this ban on conflicted retirement plan advice is squashed, ... the die is cast. Following several high-profile excessive fee lawsuits, more 401(k) plan sponsors than ever are hiring fiduciary-grade financial advisors to lower their liability. The kicker? Their impartial advice is often cheaper than potentially-conflicted, non-fiduciary advice. And [here are] the numbers to prove it!" (Employee Fiduciary)
Advisers Get Stay of Execution with Fiduciary Rule Delay
"The 60-day delay is likely to be followed by another one to allow the agency adequate time to fully vet the rule. Many stakeholders asked for a longer delay, arguing that 60 days isn't enough time to finish a review of the beleaguered rule.... The DOL also will have comments to sift through on the presidential memorandum, which are due by April 17." (Bloomberg BNA)
Fiduciary Rule Delayed by 60 Days
"During the 15-day comment period on whether to delay implementation, the [DOL] received approximately 193,000 comments ... In that deluge, wealth management firms and some advisers pushed for the rule to be postponed lest they have to make changes to client relationships multiple times. [Some] firms, fearing costly disruption to their business strategy, went further, requesting an even longer delay of up to a year or more." (Financial Planning)
[Official Guidance] Text of 60-Day Extension of Applicability Date for Final DOL Fiduciary Rule and Related Class Exemptions
63 pages. "This document extends for 60 days the applicability date of the final regulation, published on April 8, 2016, defining who is a 'fiduciary' under [ERISA] and the Internal Revenue Code of 1986. It also extends for 60 days the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs. It requires that fiduciaries relying on these exemptions for covered transactions adhere only to the Impartial Conduct Standards (including the 'best interest' standard), as conditions of the exemptions during the transition period from June 9, 2017, through January 1, 2018. Thus, the fiduciary definition in the rule (Fiduciary Rule or Rule) published on April 8, 2016, and Impartial Conduct Standards in these exemptions, are applicable on June 9, 2017, while compliance with the remaining conditions in these exemptions, such as requirements to make specific written disclosures and representations of fiduciary compliance in communications with investors, is not required until January 1, 2018. This document also delays the applicability of amendments to Prohibited Transaction Exemption 84-24 until January 1, 2018, other than the Impartial Conduct Standards, which will become applicable on June 9, 2017. Finally, this document extends for 60 days the applicability dates of amendments to other previously granted exemptions. The President, by Memorandum to the Secretary of Labor dated February 3, 2017, directed the [DOL] to examine whether the Fiduciary Rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, and to prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Rule as part of that examination. The extensions announced in this document are necessary to enable the Department to perform this examination and to consider possible changes with respect to the Fiduciary Rule and PTEs based on new evidence or analysis developed pursuant to the examination." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] DOL's Final Rule on Fiduciary Investment Advice: Overview and Considerations for Plan Sponsors
"While the fate of the regulatory package is uncertain and its most immediate effects would be on investment advisers, there are various things plan sponsors should be thinking about.... Assess the policies, procedures, and practices already in place for ensuring your fiduciary obligations are being met and to reduce the possibility of co-fiduciary liability.... Examine your investment adviser relationships, keeping in mind that plan sponsors have the fiduciary obligations of prudently selecting and monitoring all service providers, including investment advisers.... Pay close attention to services in the following areas that would be especially impacted by the new rule: [1] Rollover and distribution advice ... [2] Investment education materials and activities." (Hodgson Russ LLP)
BNY Mellon Can't Nix Retirement Plans' Suit Over Foreign Exchange Transactions
"Bank of New York Mellon must defend a proposed class action accusing it of charging excessive, unauthorized and undisclosed rates to seven retirement plans through the bank's foreign exchange transactions. Because the participants are suing in their representative capacity on behalf of the plans, they don't need to allege an individualized injury to have standing, federal district Judge J. Paul Oetken held[.]" [Carver v. Bank of N.Y. Mellon, No. 15-10180 (S.D.N.Y. Mar. 31, 2017)] (Bloomberg BNA)
DOL, First Bankers Move Closer to Trial Over ESOP Transaction
"A federal judge in New York March 29 denied motions for summary judgment by the department and First Bankers, holding that there were disputed issues of fact that couldn't be resolved at this stage. The issues to be resolved at trial include whether First Bankers failed to investigate the financial adviser's independence, whether it properly reviewed the valuation and if it negotiated the $15.5 million the ESOP paid for Rembar's stock." [Hugler v. First Bankers Trust Services, No. 12-8649, (S.D.N.Y. Mar. 29, 2017)] (Bloomberg BNA)
Peabody Energy Cleared in ERISA Challenge to Stock Losses
"The proposed class action argued that Peabody wrongfully kept company stock in its workers' retirement plans during a period in which the company was under investigation for allegedly making misstatements about the effects of climate change on its business prospects. A federal district court refused to hold Peabody liable for these actions under [ERISA], saying that the employees failed to overcome the strict pleading standards set by the U.S. Supreme Court in ERISA cases over employer stock." [Lynn v. Peabody Energy Corp., No. 15-916 (E.D. Mo. Mar. 30, 2017)] (Bloomberg BNA)
Court Upholds Eroding Defense Expense Provision; ERISA Exclusion Bars Coverage for Constitutional and Statutory Civil Rights Claims
"A number of underlying lawsuits were brought against the insured alleging that it underfunded its retirement plan and trust. The suits alleged beaches of contract and fiduciary duty, as well as violations of the Mississippi and United States constitutions and 42 U.S.C. Section 1983. The insurer defended the insured under a reservation of rights. The insurer then filed an action seeking a declaration that defense costs were included in the limit of liability and that no coverage existed under the EPL coverage part due to the Employee Benefits Law Exclusion.... On appeal, the Fifth Circuit recognized that defense costs erode the limit of liability under the plain language of the policy.... The court further held that the Employee Benefit Law Exclusion barred coverage for claims not only under ERISA and related laws but also based on federal and state constitutions and statutes, including Section 1983 claims." [Federal Ins. Co. v. Singing River Health Sys., No. 15-60876 (5th Cir. Mar. 1, 2017)] (Wiley Rein LLP)
Jackson National Sued Over In-House Funds in 401(k)
"The proposed class action claims that Jackson's retirement plan invested 89 percent of its assets -- about $542 million -- in investment funds that earned high fees for the company and its affiliates. Eighteen of the plan's 21 investment options were affiliated with Jackson, the lawsuit claims, and most of those options were 'virtually identical' to funds that other institutions offered at 'a fraction of the cost.' " [Pease v. Jackson Nat'l Life Ins. Co., No. 17-284 (W.D. Mich., complaint filed Mar. 29, 2017] (Bloomberg BNA)
DOL Fires Back at Chamber's Fiduciary Rule Appeal
"The department has 'broad authority to classify individuals as "fiduciaries" and to regulate their conduct accordingly,' the DOL said ... The Chamber's claim that it will be harmed if the court doesn't act to pause the fiduciary rule is implausible given the DOL's recent actions placing the rule's future in question, the department argued." (Bloomberg BNA)

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