fiduciary officially dead fiduciary fiduciaries

Rollover or distribution advice

The Stapley letter

Questions raised

1. If an advisor who already is a fiduciary to the distributing plan recommends a rollover or distribution, is that recommendation automatically subject to ERISA fiduciary standards?

Does it matter whether the advisor is a fiduciary with discretionary management authority, plan administrator authority or merely provides fiduciary advice that must be implemented by a third party? For example, arguably, a fiduciary that has the power to cause a distribution that benefits itself should be more problematic than a fiduciary that simply recommends (but cannot cause or control) such a transaction. Neither question is directly addressed by existing guidance.
Instead, is it possible and practicable to “firewall” fiduciary status by accepting fiduciary responsibility for advice to the plan or plan sponsor on an “ongoing” basis, but specifically disclaiming fiduciary responsibility for distributions?
Is it preferable in the absence of clear guidance to avoid fiduciary responsibility for rollover recommendations irrespective of whether the advisor provides any fiduciary services to the plan?

2. If a fiduciary to a plan does become a fiduciary for a recommended distribution from the plan, what are its options to ensure ERISA compliance?

Reliance on the BIC Exemption, pursuant to transitional relief issued by DOL, for at least so long as such relief remains in effect;
Attempting to level fees or otherwise avoid disparate fees for providing such recommendations;
Requesting a new exemption; or
Attempting to outsource distribution guidance to an independent third-party.

3. Is there a distinction between recommendations of voluntary distributions from a plan versus involuntary distributions (e.g., small cashouts or required minimum distributions)? Does the analysis change if the advisor recommends, instead of a rollover, a direct distribution to a taxable account or investment that pays the fiduciary fees? 4. Is it possible for one entity to act as a fiduciary providing investment advice to the plan and/or participants, while a different but affiliated entity provides non-fiduciary information regarding rollovers or distributions? Under what circumstances will conduct of affiliates be conflated? Allison W. Sizemore Khalif I. Ford

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Reverting to old fiduciary guidance raises new questions for recommendations

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