1. DOL FIDUCIARY RULE & REAL LIFE IMPACTS TO YOUR PRACTICE
GRP ADVISOR ALLIANCE
NATIONAL CONFERENCE
DOL FIDUCIARY RULE & REAL LIFE
IMPACTS TO YOUR PRACTICE
Marcia S. Wagner, Esq. .

2. Topics Impacting the Retirement Plan Industry Today
I. The Fiduciary Rule
II. Court Cases - The recent spike in retirement plan litigation
III. Upcoming Legislation – Its impact on the retirement plan industry

3. I. FIDUCIARY RULE So What Should You Do Now?
Depends on where you sit.

4. IARs vs. Registered Reps.
IARs are accustomed to being ERISA fiduciaries, but they need to understand that the ERISA requirements are applicable as of 4/10/17 to their IRA clients.
Real issue will be with registered reps. and commissionable sales.
Training & Rollout.

5. Anticipated Trends in B/D Industry
Strategic Courses of Action
Levelizing commissions and structuring revenue sharing as flat dollar payments
More RRs migrating to advisory service model
Promoting advisory programs featuring institutional mutual funds and variable annuities
Support for Smaller Retirement Accounts
Reducing minimums for advisory programs
Relying on Computer Model Exemption (robo-advice) to earn commissions
General Fee Compression
Increased Margin Compression

6. BD Firm/BIC Officer Responsibilities re: Best Interest
Create reasonable payout grids and monitor compliance therewith.
Monitor reps. so that they do not skew advice to highest paying products.
Educate and train registered reps. re: holistic financial planning and fiduciary responsibility
Modifications and potential winnowing down the investment line-up. 

7. Financial Advisors - Strategic Use of Financial Plans
Consider using financial plans to ensure recommendations are in “Best Interest” of client
Quality financial plans by their nature can help demonstrate prudent advice
BIC compliance policies must address conflicts and variable compensation issues
Requiring financial plans (before investments are recommended) can help mitigate conflicts

8. Product Manufacturers - Be A Thought Leader and Innovator
Now Is The Time to Increase Your Footprint
Consider publishing white papers
Consider providing toolkits for rollovers, BICE, templates, compliance policies.
Consider having a help desk.
Make life for BIC officer and CCO easier, they will be overwhelmed.
Consider opinion of counsel regarding best interest standards and how your product fits in.
Consider assisting with education and training of broker-dealers, financial advisors (not selected based on assets with you!) regarding the new fiduciary rule.
Wholesalers – be careful not to become fiduciaries.

9. II. COURT CASES – The recent spike in retirement plan litigation

10. Tibble v. Edison International
Beneficiaries claimed that Edison violated its fiduciary duties when it imprudently offered six higher priced mutual funds when materially identical lower priced mutual funds were available.
The Supreme Court found that a fiduciary has “a continuing duty to monitor trust investments and remove imprudent ones,” in addition to his/her duty to exercise prudence in selecting investments.
Fiduciaries need to carefully monitor investment and document their findings.
A gap analysis should be performed periodically to ensure that investment are properly monitored.

11. White v. Chevron Corporation
Plaintiffs’ allegations included:
selecting a money market fund as a capital preservation fund, rather than a stable value fund
providing “retail” investment options rather than the lower cost “institutional versions” of the same investment options
providing mutual funds, rather than other lower cost investment options such as collective trusts or separate accounts
failing to put plan administrative services out for competitive bidding on a regular basis, and as a result paying excessive recordkeeping fees through revenue sharing
retaining a particular fund as an investment option despite its underperformance prepared to its benchmark, peer-group, and lower cost investment alternatives
failing to monitor its appointees’ performance and fiduciary process
failing to ensure that the appointees had a fiduciary process in place
failing to remove appointees whose performance was inadequate

12. Tussey v. ABB
Failure to monitor recordkeeping costs and negotiate rebates
Plan fiduciaries:
made no effort to determine if fees were reasonable
Replaced one fund with an alternative fund because decision benefitted plan sponsor, not participants

13. Government Audits
The following government agencies routinely audit retirement plans, and plan sponsors should be prepared.
DOL
IRS
PBGC

14. III. UPCOMING LEGISLATION – Its impact on the retirement plan industry

15. How Retirement Plans Affect the Deficit
Impact of retirement plans on federal deficit
DC / 401(k)
$61 billion (2015)
$414 billion (2015 – 2019) DB
$42 billion (2015)
$235 (2015 – 2019)

16. Affect of Limiting Contributions
2017 Plan limitations that can be reduced to limit deficit:
Annual additions from all sources - $54,000
Elective deferrals - $18,000
Plan sponsor deductions – 25% participant compensation
Compensation limit to determine benefits/contributions - $270,000

17. Affect of Limiting Contributions (cont’d)
Limits proposed by Tax Reform Act of 2014
Freezes DC limits until 2024
$63.4 billion revenue gain over 10 years
Additional $144 billion from treating half of 401(k) deferrals as Roth

18. State Proposals State-managed plans for private-sector workers
Intended to expand access to retirement savings
States would manage investments
DOL clarifies preemption issue in regulation
California Secure Choice
Mandatory auto-IRA
Pooled investments managed by state and guaranteed returns

19. DOL FIDUCIARY RULE & REAL LIFE IMPACTS TO YOUR PRACTICE
GRP ADVISOR ALLIANCE
NATIONAL CONFERENCE
DOL FIDUCIARY RULE & REAL LIFE
IMPACTS TO YOUR PRACTICE
Marcia S. Wagner, Esq. A