How ERISA plan sponsors should respond to the new fiduciary rule

Tip for June 2017


Until now, a retirement plan participant’s transfer or rollover of their account balance to an individual retirement account (“IRA”) was, for the most part, off the grid of plan sponsors’ fiduciary management systems because IRAs were not under the jurisdiction of the U.S. Department of Labor.

Due to the new Conflict of Interest rule, however, IRA rollovers will require a great deal more care and oversight by plan sponsors than before. Employers will need to upgrade their internal procedures in order to ensure that their employees are advised only by persons and organizations that comply with investment fiduciary advice provisions contained in the Conflict of Interest rule.

It’s very important to understand that a fiduciary duty violation is triggered when fees for investment advice delivered to an IRA holder are paid to an advisor that doesn’t comply with the Conflict of Interest rule. Verification of a financial consultant’s compliance status is vital for plan sponsors because a prohibited transaction violation will be assessed for non-compliant advice arrangements.

  • IRA rollover advice scenarios can be complex, each one requires its own analysis;
  • investment consultants’ credentials do not guarantee their compliance with the Conflict of Interest rule; and
  • recordkeepers and third party administrators are not plan fiduciaries and cannot appoint investment consultants.


The Conflict of Interest rule was effective June 9, 2017. Rollovers to IRAs that occurred after that date are subject to the DOL’s enforcement. Here’s what plan sponsors should do:

  • upgrade your fiduciary management system to intercept rollovers before they are executed;
  • identify which rollovers will be handled by investment consultants that your plan’s participants intend to hire;
  • validate the consultant’s compliance with the Conflict of Interest rule; and
  • document the process you used.

You may ask Roland|Criss here for help in upgrading your fiduciary risk management system to adjust for the Conflict of Interest rule.

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