More than six years have passed since the U.S. Department ofLabor first rolled out its fiduciary rule for the retirement industry, butwhether that rule becomes effective in early June, as now planned,still remains uncertain.

Despite the delay, analysts say the mere threat of thefederal rule going live — along with a decade of class actionlitigation — already has wrought changes to an industry more in thepublic view than ever before. As the attorneys who representcompanies parse the fine print to ensure legal compliance shouldthe rule stand, some observers predict many companies will adoptstricter standards for a simpler reason: good business.

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"The cat's out of the bag," said Stephen McCaffrey, boardchairman of the Chicago-based Plan Sponsor Council of America."People, their eyes are open about the things that they have to askfor and look at.

They recognize that it's their money and they need to askquestions."

It doesn't mean Republicans aren't pushing back. PresidentDonald Trump in February ordered the agency to re-examine the rule,which was due to go into effect in April but was delayed untilearly June. The regulation was designed to extend fiduciaryresponsibilities to a wider universe of people providing retirement advice.

Financial firms and their attorneys are scrambling to keep pacewith its evolution in Washington, though experts note that thepolicy fight of the past half dozen years has already had asignificant impact on the industry.

Indeed, the landscape for handling retirement accounts has beentransformed in recent years — and many analysts expect a number ofthose changes to stick. A series of class action lawsuits hatchedover the past decade are credited with significantly reducing feesassociated with 401(k) plans and with ensuring that the interestsof employees and retirees come first in the management of thoseplans.

At the same time, the DOL's measure has put the term "fiduciary"squarely in public view — bringing with it attention from consumersthat may spur many companies to broadly comply with the newstandard, regardless of its official status.

"There's a higher level of care throughout the industry," saidMarcia Wagner of Wagner Law Group in Boston, who specializes inemployee benefits law.

Regulatory uncertainty

For those in the retirement industry, the next key date to watchis June 9, when the first components of the DOL rule are nowplanned to take effect. While there's still considerableuncertainty around its final fate — including whether controversialparts or even the whole rule is reversed — attorneys are advisingclients to move forward with compliance, assuming the date willstand.

"Are companies gearing up to comply with June 9? Yes, they are,"said Kent Mason, a partner at Davis & Harman in Washington whospecializes in retirement savings. "People have to assume, at leastfor now, that what's in the document is final. Obviously, it canchange, but I don't think people can count on that for compliancepurposes."

The delay notice hinted that financial advisers and othersimpacted should take the date seriously, suggesting that it wouldbe "inappropriate" to "broadly delay" implementation of the newdefinition for fiduciary advice and its best interest standard "indisregard of its previous findings of ongoing injury to retirementinvestors."

But here are some analysts who doubt that the entire rule willsurvive intact. "In some ways, this is career staff slow-walkingthe execution order of a rule they crafted," said Edward Mills, apolicy analyst at FBR Capital Markets based in Arlington, Virginia,particularly given that the delay language was finalized without aTrump-appointed labor secretary in place. (At press time, thepresident's nominee, Alexander Acosta, was approved by a U.S.Senate panel but not by the full Senate.)

"To me, the important thing is, what does the Trumpadministration and the Republican Congress want to do? They don'twant this rule to go into effect," Mills said, predicting that themost likely outcome remains "a series of short-term delays that areultimately going to lead to a long-term delay, a revoking of therule or a fundamental rewriting of the rule."

A spokesman for the Department of Labor did not respond torequests for comment on its review of the rule.

Still, while companies scramble to keep pace with the latestdevelopments regarding the regulation, observers said that someadvisers and brokers may adopt the stricter fiduciary standardvoluntarily in order to differentiate themselves from competitors.With so many firms working for a year or longer to put thefiduciary rule into place, the regulation already has promptedsignificant changes in the retirement industry.

"There's a lot more focus on compensation arrangements anddifferent fee structures," said Seth Safra, a partner at ProskauerRose in Washington who focuses on employee benefits and executivecompensation. "No matter what happens, the awareness is not goingto go away. Just from a competitive perspective, service providersare looking at this and saying, 'Maybe we can use some of this toour advantage to distinguish ourselves in the marketplace.'"

That's due in part to the widespread publicity the rule hasgarnered, which extends far beyond the nation's capital.

Plaintiffs' bar action

One of the most contentious fights over the fiduciary ruleinvolves how much potential legal liability those covered under themeasure will have to assume under the regulation. Morningstar Inc.analyst Michael Wong estimated in February that class actionlitigation stemming from the rule could cost the industry $150million annually — or even more in the early years — among thoseselling commission-based products under one of the rule'sexemptions.

The brokerage industry doesn't have to look far to see thethreats that such liability can bring, as a handful of plaintiff'sfirms has filed dozens of cases against employers for breach offiduciary duty in recent years with respect to the management ofemployee 401(k) plans.

"The risk of fiduciary lawsuits is very significant," saidSafra. "All of the 401(k) litigation that's going on right now isenough to see why one would be scared about that, even where thefiduciaries have had some success" in defending themselves.

Defined-contribution plans have been replacing traditionalpensions since the 1980s, but oversight of the programs and theirmanagement failed to garner much attention in those early years.One firm, Schlichter Bogard & Denton, began pursuing cases inthe mid-2000s against employers that, it argued, were allowingparticipants to be charged excessive fees, including cases wherethose fees presented a conflict of interest or the possibility ofself-dealing for the companies involved.

"What existed was a system in a dark closet," said JeromeSchlichter, founding and managing partnerof the St. Louis-based firm Schlichter Bogard & Denton, who'sbeen leading the class action fight against 401(k) plansponsors.

Dozens of cases have since been filed by the firm and others,and Schlichter has been credited with helping to reduce overall401(k) record keeping fees by an estimated $2.8 billion per year.He's secured a number of high-profile settlements, including a $62million deal with Lockheed Martin Corp. in 2015, the largest todate. Just two of the cases have gone to trial so far, and bothcontinue to wind their way through the courts after more than adecade. Schlichter called the effort to bring the litigation "anintense battle."

Plan sponsors "know that actions that they may have taken in thepast that they thought were responsible are going to be scrutinizedmuch more carefully," said Mark Hess, a partner at Fox Rothschildin Los Angeles, who focuses on employee benefits law.

Still, he noted, the enhanced scrutiny that's come with thethreat of lawsuits could motivate plan sponsors to become overlycautious in their management.

"Judgment is going to be impaired somewhat by the fact thatthey're always looking over their shoulders — how can my actions beinterpreted five years from now?" Hess added.

Going forward, it appears that plaintiff's firms may be lookingto raise the bar even higher for companies managing a 401(k) plan.Charles Humphrey, an attorney for Fiduciary Plan Governance, aNewbury, Massachusetts-based consultancy, points to a handful ofcases filed over the past two years that further probe the actionstaken by plan sponsors with respect to their fiduciary duties,digging into the performance and design of certain investments.

Such cases indicate that "the plaintiff's bar is trying to delveinto the weaknesses of particular employee benefit plans to see ifthey can exploit those weaknesses," Humphrey said, though it'sunclear at this point whether the new efforts will besuccessful.

These trends will be crucial to watch for organizations of allkinds. Company executives who take on a fiduciary role arepersonally liable under the law — breaching those duties willfullycan lead to significant fines and even jail time. And yet, expertssay, many fiduciaries still don't necessarily understand the extentof the responsibilities involved in managing a firm's 401(k)plan.

"A lot of these people are volunteered into the position," saidPSCA's McCaffrey. "Their duty of loyalty is solely to theparticipants and the beneficiaries — and they need to know, whenthey walk into a fiduciary meeting, they have to shed their companyhat."

The combination of the pending federal fiduciary rule and theheightened risks associated with class action lawsuits have pushedplan managers, advisers and other players to pay closer attentionto implementation and oversight of retirement savings accounts.Whether or not the Labor Department ultimately decides to rescindthe intensely debated regulation, those broader changes areunlikely to dissipate.

"There was a huge lack of understanding, and I think the entireindustry — from plan sponsors to plan vendors — is evolving," saidWagner. "People now understand that this is a seriousresponsibility."