For years, people have been consulting with financial advisors who are sponsored by retirement plans to receive information and advice on how to best proceed with their retirement investments. The Department of Labor allowed for this under its fiduciary advice rule, but that rule was recently stricken down by a 5th Circuit Court of Appeals ruling, according to the Society for Human Resource Management.
Legal experts anticipate that there will be another rule coming down the pipeline that covers this same topic, but that could take months or even years to complete. In the mean time, organizations that offer retirement savings plans and investment accounts need to figure out how to maneuver through the law now that the rule no longer exists.
What was the fiduciary rule?
The rule was a part of the Employee Retirement Income Security Act, or ERISA, and it served to broaden the legal definition of fiduciary so that it included financial experts who provided advice and recommendations to those who sponsor retirement plans and those who participate in those plans. This rule was created so that advisors would be able to provide recommendations that were uniquely suited to the individual’s needs, and to make them aware of any conflicts or interest. Prior to the establishment of the rule, the definition was more vague and advice did not have to reveal whether there was another option available that offered lower fees.
The fiduciary rule Is gone, but the suitability standard is back
When the 5th Circuit Court of Appeals eliminated the rule, no appeal was made. Therefore, the rule was dead and the Suitability Standard returned. Ultimately, the return of this standard means that financial advisors who are working with retirement plan enrollees may want to revisit their terms of service. Some advisors may want to avoid offering any more fiduciary advice than is required by law, while others may prefer to hold themselves to a standard that higher than required by the law.
Temporary guidelines are available from DOL
Knowing that the court ruling would impact the way that advisors provide services to those who are part of a retirement savings plan, the Department of Labor issued a bulletin that offered temporary guidance during this transitional time period. Essentially, these guidelines said that organizations could continue their fiduciary advice efforts as long as they could prove they were making an effort to adhere to the standards established by the court ruling. Ultimately, these temporary guidelines allow people to continue working as the new permanent rules and regulations are established.
How does this court ruling impact you?
ERISA laws are notoriously complex, and it can be difficult to keep up-to-date on the changes when you are juggling your own responsibilities. If you are wondering how this court ruling impacts you and your retirement savings plan, be sure to contact our law firm today. Our qualified attorneys will work with you to help you understand your current circumstances and to advocate for you if needed.