April 2016 Archive

Investment education under the Conflict of Interest regulation

April 19, 2016

The Department of Labor’s Conflict of Interest regulation, re-defining who is an ERISA “fiduciary,” supersedes current rules (under Interpretive Bulletin 96-1) on investment education. Under the new regulation, activities that come within the definition of “investment education” are not “recommendations” within the meaning of the new rule and thus do not trigger fiduciary status. The new rule tracks IB 96-1 in many respects, but there are some key differences. In this article we begin with background on why the education vs. advice distinction matters. We then provide a brief summary of the changes made by the new rules. Finally, we discuss the new rules in detail. Read More

Company stock and inside information: DOL’s view

April 06, 2016

In the aftermath of the Supreme Court’s 2014 decision in Fifth Third Bancorp et al. v. Dudenhoeffer, the stock drop lawsuits that are getting the most traction with courts generally involve claims that plan fiduciaries were aware of inside information on the basis of which they could have reasonably concluded that the company stock’s market price was “artificially inflated.” Plaintiffs are asserting that in those circumstances plan fiduciaries should (at a minimum) have stopped buying company stock. (“Stock drop” cases involve company stock held in, e.g., a 401(k) plan that has lost significant value (hence, "drop"), in which the plaintiff argues the plan’s fiduciaries had an obligation to sell plan stock (or not continue to buy it) before or during the “drop.”) Read More

DOL’s new Conflict of Interest regulation in brief

April 11, 2016

The new DOL regulation (and related rules): (1) re-defines who is an “investment advice fiduciary” under ERISA, expanding those situations in which giving investment advice to an employee benefit plan, plan fiduciary, participant, or IRA owner makes the advice-giver an ERISA fiduciary; and (2) significantly changes what sorts of advice may be given, to whom and in what circumstances. The new rules will probably have their greatest effect on brokers, mutual funds, and certain other financial services providers and on consultants and third party administrators. Read More

DOL finalizes re-definition of ERISA “investment advice fiduciary”

April 11, 2016

On April 6, 2016, the Department of Labor finalized its regulation re-defining who is an “investment advice fiduciary” under ERISA. In connection with that regulation it also finalized two new prohibited transaction exemptions (PTEs) and amendments (and revocations) of certain prior PTEs. With this regulation package, DOL is expanding those situations in which giving investment advice to an employee benefit plan, plan fiduciary, participant, or IRA owner makes the advice-giver an ERISA fiduciary (“investment advice fiduciary”). It significantly changes what sorts of advice may be given, to whom and in what circumstances. Read More

Final Best Interest Contract Exemption

April 11, 2016

The Department of Labor’s conflict of interest regulation package, re-defining who is an ERISA “investment advice fiduciary,” re-labels many relationships as “fiduciary” that, under current rules, aren’t. The new regulation includes a “sellers exception” for advice in connection with arm’s length transactions, generally available with respect to “institutional” advice recipients. With respect to “retail” advice, including advice to plan participants, as part of the package, DOL also finalized a Best Interest Contract Exemption (BICE). The BICE allows Advisers receiving “conflicted payments,” and related Financial Institutions, to provide advice to plan participants (and to IRA holders and small plans), so long as certain conditions are met. Read More

March 2016 Pension Finance Update

April 04, 2016

Good month, bad quarter. Pension sponsors recovered some ground last month but remain in the red for 2016 at the end of the first quarter. Both model pension plans we track gained ground last month: Plan A improved 2% in March, but remains down more than 5% this year, while Plan B added 1% last month and is now down 3% during 2016: Read More

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