While industry groups applaud the Labor Department’s recent decision to seek a delay of the January compliance date for its fiduciary rule by 18 months, they say such an extension comes with its own set of problems.
The ERISA Industry Committee told Labor in a Wednesday comment letter that while ERIC supports a delay, “uncertainty as to plan fiduciaries’ obligations to monitor service providers’ adherence to the rule has caused some plan fiduciaries to consider directing substantial resources toward compliance costs rather than toward providing benefits,” an outcome ERIC suspects is not consistent with the department’s intention in implementing the rule.
The group, which advocates for large employers on health, retirement and compensation public policies, asked Labor for “clear guidance on how plan fiduciaries can satisfy this duty to monitor that will allow them to channel the appropriate resources needed, and not more, toward this monitoring obligation.”
Will Hansen, senior vice president of retirement policy for ERIC, told ThinkAdvisor on Thursday that Labor’s plan to extend the transition period from Jan. 1, 2018, to July 1, 2019, will also postpone additional guidance from Labor “on how a plan sponsor should properly monitor the fiduciary obligations of a recordkeeper that is now providing rollover and other investment advice to plan participants,” activities that prior to June 9, when the rule’s Impartial Conduct Standards kicked in, “were not necessarily deemed a fiduciary level event.”
Plan sponsors, Hansen said, want more guidance from Labor “on how to satisfy the new standards the rule [has] imposed on them with respect to monitoring activities of plan recordkeepers and other consultants.”
Beyond that guidance, ERIC asked that the department allow service providers to present an annual certification that they did not provide any fiduciary investment advice to plan participants in the past year; or an annual certification that they did so and that the advice satisfies all relevant fiduciary obligations.