NASHVILLE – As he opened the NAPA 401(k) Summit Sunday afternoon, NAPA executive director and American Retirement Association CEO Brian Graff started with a then-and-now comparison: “At the first 401(k) Summit, I said ‘Now we have to recognize that the 401(k) is America’s retirement plan.’”
Now, at the 15th annual 401(k) Summit, Graff said, “We have to recognize that the Department of Labor is America’s sheriff.’”
His state-of-the-industry address to NAPA members centered on the one thing that has compelled the attention of the retirement industry for over five years now: the DOL fiduciary rule.
Graff outlined key changes between last year’s proposed DOL fiduciary rule and the recently finalized version for the over 1,700-person crowd of plan advisors, sponsors, recordkeepers, and other industry types.
But first, there was the fiduciary rule as baby metaphor.
“This thing has been like waiting for a baby to be born. Then when it’s born, you’re up all night, reading and reading, a thousand pages, twice. And like a baby, it keeps you up at night. Even though I’ve read through 2000 pages, I think about it.”
He went on to call up a situation most parents of baby boys have encountered. “You change the baby’s diaper, and what does your son do to you? He pees you in the face. And when I look at this reg every once in a while, I feel like yeah, I’m getting peed in the face. But you can’t walk away from it. It’s your baby.”
“I know some people want to put the baby up for adoption. Those are the folks who will file a lawsuit. It’s going to happen. But we are operating under the assumption that we’re keeping the baby and we’ll have to deal with it.”
One thing that people might agree on, Graff said, is that “The fiduciary rule will be great for lawyers.”
But the big question for NAPA members is, “What does it mean for us?”
He mentioned several areas of the rule that are of interest to NAPA, where the latest version eased fears raised by the earlier version:
Rollovers: This was “a huge issue for us for advisors.” The DOL however, did what Graff said NAPA had requested “after many meetings” and at least “clarified what constitutes advice in rollover conversations.”
The BIC Exemption: The DOL added the Level Fee Fiduciary Streamlined Exemption “or as some like to call it BIC Lite.”
A basic question firms will have to consider is this: “Is it BIC or is it BIC lite? There is no third option.”
“With BIC — you have more liability, more cost of compliance, more flexibility in how you do business. With BIC lite, you have less liability, less compliance cost, much less flexibility.
Another issue that was critical, and important to NAPA, was the issue of plan education. “We were the only org that focused on this issue,” Graff said.