• Neal Shikes

Why The DOL Fiduciary Regulation Was Revised


The Employee Retirement Income Security Act of 1974 (ERISA) was established as a federal law. One of its intents was to provide a sense of Fiduciary Responsibility for those designated as Fiduciaries defined, in action, as those who have a role in managing and controlling Retirement/Pension Plan assets. It also defined a plan Fiduciary to include anyone who gives investment advice for a fee.

In 1975, the Department of Labor (DOL) looked to elaborate on “investment advice” and issued a 5-part regulatory test that provided some structure to the meaning. About 40 years later, the DOL started to recognize that it actually enabled Financial Advisers, Brokers, Consultants, and Valuation Firms to:

. Avoid Fiduciary Status . Disregard Fiduciary Obligations . Disregard prohibitions on “disloyal and conflicted transactions”.

In effect, Employer Sponsored Retirement Plans became a platform for Financial Advisers, Brokers, Consultants, and Valuation Firms, to steer Retirement Plan Participants to investments based on their own self-interest. This type of intent is prohibited by ERISA.

These advisers represent a whole generation of people who have no idea as to what the spirit of these laws are, no Fiduciary awareness, and no fear of accountability under ERISA. This is what the Department of Labor is trying to remedy.

#Regulation #RetirementPlans #401k

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