Even though 70% of 403(b) plan sponsors are aware of the
Department of Labor’s Conflict of Interest rule, which takes effect in April
2017, less than half of small sponsors are aware of this major regulatory shift in the industry, according to a survey by the Plan Sponsor Council
of America (PSCA).
In addition, more than half of respondents (59%) plan to
make no change in light of the new rule, which extends fiduciary responsibility
as defined by Employee Retirement Income Security Act (ERISA) to virtually
anyone providing advice to a retirement plan.
The survey also highlighted strategies some plan sponsors
are taking to comply with the DOL rule including hiring a fiduciary adviser or switching
to one (24%), changing investment lineup (19%), and reevaluating plan governance
“Though the impending Department of Labor fiduciary
regulatory package has certainly raised awareness of fiduciary
responsibilities, plan sponsors who are unsure of their role—especially those
small organizations—should review their plan governance processes with their
service providers and advisers,” suggests Hattie Greenan, PSCA’s director of
research and communications.
In addition, the study found that 40% of all plan sponsors
feel their plan service providers act in a fiduciary capacity, while 50% say
their plan adviser is not a fiduciary.
And even though the Trump administration with an outspoken
regulatory critic as DOL secretary casts some uncertainty on the future of the fiduciary rule, many industry experts argue any pushback will
likely not take place by the time the rule is implemented. They urge plan
sponsors and advisers to proceed with strategies for compliance.
“This environment strongly suggests that all plan sponsors work with advisers
to understand the various fiduciary roles and how responsibilities are
fulfilled,” says Aaron Friedman, tax-exempt national practice leader at
Principal Financial Group. “It will be a collaborative industry effort among
advisers, plan sponsors and service providers.”
The 403(b) Snapshot Survey by the PSCA was sponsored by the
Principal Financial Group. It reflects responses from 281 not-for-profit
organizations that currently sponsor a 403(b) plan. For more research, analysis
and insights from Principal, visit the Principal Knowledge Center.