What it takes to be a fiduciary
The Department of Labor’s Conflict of Interest proposal is significant on many fronts, not the least of which…
The Department of Labor’s Conflict of Interest proposal is significant on many fronts, not the least of which is how it redefines what it means to be a fiduciary.
Instead of the five-part test laid out in 1975, the new proposal offers a four-part test:
| 1975 rule: 5-part test | 2015 proposal: 4-part test |
|---|---|
| A person renders advice to the plan as to the value of or advisability of buying, selling, investing in securities or other property | Renders advice to a plan, plan fiduciary, plan participant or beneficiary, IRA or IRA owner |
| On a regular basis | Regular basis NOT required; once is enough |
| Pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between the plan or plan fiduciary | Pursuant to a written or verbal agreement, arrangement or understanding … The advice will be individualized to the plan based on the particular needs of the plan |
| … that the services will serve as a primary basis for investment decisions | … that the advice is given for consideration in making investment or management decisions |
| The advice will be individualized to the plan based on the particular needs of the plan regarding such matters as investment policies or strategy, overall portfolio composition and diversification | … that the advice is individualized to, or that the advice is specifically directed to, the advice recipient |
Source: Pete Swisher, senior vice president of national sales at Pentegra Retirement Services
Learn more about reprints and licensing for this article.
