Obama-era Fiduciary Rule Voided by U.S. Appeals Court

Last week, a federal appeals court voided the DOL’s Obama-era fiduciary rule. The rule was adopted in 2016 in an attempt to curb conflicts of interest among providers working with Americans that were planning for retirement. The Fifth U.S. Circuit Court of Appeals came to a 2-1 decision and represented another big win for financial service groups under the Trump administration. Many such financial groups claimed the rule overly burdensome and feared that it would drive up the cost of providing retirement financial advice.

This follows President Trump’s earlier memorandum, which had delayed implementation of the rule pending further examination of how the rule may affect investors and retirees. The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) subsequently announced in the Federal Register on April 7, 2017 that compliance deadlines for many provisions of the rule had been pushed back to January 1, 2018, to allow more time for DOL’s re-examination of the rule’s impact. Full implementation of the final rule would not be complete until July 1, 2019—much later than the completion deadline of January 1, 2018 provided in the original final rule. This has now been put on complete hold and the issue is predicted to go before the Supreme Court

The fiduciary final rule sought to expand the definition of “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) to require virtually all individuals who provide retirement plan advice to ensure that advice and recommendations are made in the best interest of the participants. Retirement plan fiduciaries would be required to uphold standards of care and trust to make choices solely for the benefit of plan participants and beneficiaries, as opposed to the previously held standard of “suitability”.

This turn of events, naturally, puts discussions of  fiduciary duty at the forefront in the wake of the final rule announcements and now this overturn by the court of appeals, employers that sponsor a retirement plan may be left wondering whether their current retirement plan providers are considered to be fiduciaries to the plan. While the retirement plan sponsor (usually the employer) is considered a fiduciary to the plan, third-party service providers may or may not be fiduciaries to the plan. Additionally, one aspect of the plan sponsor’s fiduciary duty is the requirement to select a third-party service provider that is skilled, diligent, and, prudent.

This is a developing issue, so be sure to follow our blog for updates.

Boon Investment Group (CRD# 150102) is a Registered Investment Advisor (RIA) and can provide impartial information regarding investment lineup and ongoing due diligence in an investment fiduciary capacity. The ability to provide impartial recommendations and advice sets Boon Investment Group apart from other firms in the employer-sponsored retirement plan space. While other firms can only offer a non-fiduciary retirement plan platform, Boon Investment Group can provide education and advice to employers in the best interest of retirement plan participants.

Boon Investment Group is carefully monitoring news and announcements regarding the fiduciary final rule. Questions about an employer-sponsored retirement plan? Contact The Boon Group for more information about retirement plan services.

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