HR Alert

FAQs on Conflict of Interest Rule for Retirement Plans

Sets of FAQs Now Available

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has released two sets of FAQs on the agency's conflict of interest rule for retirement plans.

Federal law protects plans, plan participants, and IRA owners by requiring all who provide retirement investment advice to abide by a "fiduciary" standard. Among other responsibilities, fiduciaries are required to act impartially, provide advice that is in plan sponsors' and plan participants' best interests, and are not permitted to receive payments creating conflicts of interest without a prohibited transaction exemption (PTE).

The EBSA released a final rule expanding the number of persons that are subject to fiduciary standards when they provide retirement investment advice, including exemptions that would allow advisers to continue to receive payments that could create conflicts of interest if certain conditions are met.

Two sets of FAQs related to the final rule have been released, as described below.

  • Part I - Exemptions. Among other things, these FAQs provide information on compliance dates and the Best Interest Contract Exemption (BIC Exemption). The BIC Exemption aims to ensure that retirement investors receive advice that is in their best interest while also allowing advisers and their financial institutions to continue receiving compensation that would otherwise be prohibited (e.g., commissions, 12b-1 fees, and revenue sharing). The FAQs address certain topics regarding the BIC Exemption, including general information, level fee fiduciaries, bank networking arrangements, disclosures, and grandfathering. Click here to read the FAQs.
  • Part II - Rule. These FAQs regarding implementation of the conflict of interest final rule focus particularly on specific technical questions raised by financial service providers. Topics include investment recommendations, investment education, general communications, marketing platforms for individual account plans (and providing assistance in selecting and monitoring investment alternatives), and transactions with independent fiduciaries with financial expertise. Click here to read the FAQs.

The EBSA's website on the conflict of interest rule contains additional resources concerning the rule.

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