© 2016 Liberty Financial Resources

  • Facebook - White Circle
  • LinkedIn - White Circle
  • Twitter - White Circle

WHAT IS  DOL?

Need some background about the DOL Fiduciary Rule?

Read below to find out everything you need to know!

Congress enacted the Employee Retirement Income Security Act (ERISA) in 1974. Since then, the Department of Labor (DOL) has been employed in order to protect every American's precious earned, tax-preferred retirement savings. At that time, retirement advice was quite limited as things every American is familiar with such as a 401(k) or an IRA either did not exist or were not yet authorized. While the retirement planning landscape has taken on significant change since 1974, the original rules formulated by the DOL have never been updated.

Congress enacted the Employee Retirement Income Security Act (ERISA) in 1974. Since then, the Department of Labor (DOL) has been employed in order to protect every American's precious earned, tax-preferred retirement savings. At that time, retirement advice was quite limited as things every American is familiar with such as a 401(k) or an IRA either did not exist or were not yet authorized. While the retirement planning landscape has taken on significant change since 1974, the original rules formulated by the DOL have never been updated.

In 2009, the DOL began an overhaul project aiming to fix the conflict of interest issues regarding investment advice while seeking to protect retirement savings plans from harmful advice. After several years, on April 20, 2015, the Department of Labor published a proposal in attempts to further develop the definition of fiduciary investment advice. Shortly after, public hearings were set in motion and commentary flooded into the DOL providing both support and disapproval of the rule. About a year later, on April 8, 2016, the final rule was published.

When Will This All Go Into Effect?

The DOL has provided a one year grace period from the time the rule was published. As of right now, the effective date is April 10, 2017. Considering that there are numerous requirements placed on advisors, the rule will be phased in starting in April 2017 with full compliance and implementation of the rule to be complete and in effect January 1, 2018. Per DOL, this phase in will allow ample time for advisors to study and learn the requirements of the rule and to adjust their business practices to properly comply.

What is The DOL Objective?

The DOL has three primary objectives:

1. Require advisors to acknowledge fiduciary duties and obligations and be held to the best interest standard.

2. Give consumers protections via legal recourse against bad advisors via the Courts and ERISA.

3. Assure compensation to advisors is reasonable and that any potential conflicts are disclosed.

Which Plans are Affected?

In the image below, you will see a listing of affected and non-affected plans. Rather than go into a very technical and lengthy discussion, you should just be aware that if you are giving financial advice regarding a client or prospects qualified money, you become a fiduciary advisor and must be in compliance with the DOL rules.

 

Impact on Advisors

In the new DOL world almost everyone becomes a fiduciary advisor. You are now subject to a new compliance regime and liability for IRA advice. How you are paid must be disclosed and you may only be paid a commission if you satisfy the requirements of an "exemption." There are two exemptions available and the type of product you are recommending is what determines the exemption that may be used. The two exemptions are:

1. PTE 84-24 - For fixed annuities and life insurance

2. The Best Interest Contract "BIC" for everything else including Index Annuities

In addition to how you may be paid, there are a number of other changes to the way that conduct your business that you will need to become familiar with an make sure you comply. We are here to help you through the entire process.

 

For additional information on how the DOL rule will specifically impact you, the independent producer, download our FREE report, The Top 10 Questions to Ask Regarding the DOL Rule.

Affected Plans:

  • 401(k) Plans

  • IRAs

  • Tax Qualified Plans as described in IRC section 4975

  • Sole Proprietor Plans

  • Health Savings Accounts

  • Archer Medical Savings Accounts

  • Coverdell Education Savings Accounts

  • ERISA - covered 403(b) plans

Non-Affected Plans:

  • Non-Qualified Plans

  • Non-ERISA covered 403(b) plans

  • 529 Plans

  • 457 Plans

    • Government Funded

    • Non-governmental