The issues to watch when the Department of Labor re-proposes its fiduciary rule involve individual retirement accounts, a practitioner said during an audiocast sponsored by Drinker Biddle & Reath LLP.
Although the DOL has regulatory authority of IRAs, the agency doesn't have enforcement authority over these accounts, said Fred Reish, a partner in the firm's Los Angeles office, during the June 5 event.
“And yet the one area where they have limited or no enforcement authority could be the hot button issue,” he said.
Reish said he thinks the re-proposal may include guidance on how far advisers can go when recommending to participants that they take a distribution from their retirement plan and roll it over into an IRA before they become fiduciaries to that plan.
It is possible the DOL will mimic guidance issued by the Financial Industry Regulatory Authority Inc. in December 2013 that said a firm's recommendation that investors roll over their retirement plan assets to an IRA involves securities recommendations subject to FINRA rules, Reish said.
“If the DOL takes the same position that any recommendation, or many recommendations to take a distribution out of a plan and roll it over to IRAs, even if the adviser is not an adviser to the plan, would cause that adviser to become a fiduciary,” they then would have to make recommendations in the best interest of the participant as a fiduciary, he said.