I admit it—I am an ERISA nerd. As head
of the ERISA & Fiduciary Services group in the Vanguard Legal Department, I
truly get excited when big ERISA events occur: the occasional legislation with
retirement plan provisions, benefits decisions from the Supreme Court, and big
retirement plan regulatory packages.
The Department of Labor’s (DOL) April
6 release of its final rule updating the definition of fiduciary advice was one of those seminal events for
ERISA lawyers—the biggest retirement plan development in ten years. The ERISA
nerd in me sat down with a shot of caffeine, a fresh legal pad, a pencil, and a
highlighter to dig into the 1,000-plus-page release.
One main theme coming out of earlier
versions of this set of rules was the potential for unintended consequences.
This was a big package that fundamentally changed the parameters of what
constituted fiduciary conduct.
The vast majority of the provisions
directly address the actions and behaviors of service providers—for example,
responding to requests for proposal (RFPs), providing investment lineup
monitoring support, or providing investment education to participants. But
following the DOL’s 2015 proposal, the sheer breadth and reach of the rules
caused some to question whether employees in a plan sponsor’s payroll,
accounting, human resources, and financial departments would become plan
fiduciaries when talking to participants and beneficiaries about plan
investments or distribution options.
On this front, the final rule contains
good news. The DOL explicitly concluded that it generally doesn’t consider such
communications to be fiduciary advice unless the employee is paid specifically
to provide such advice (reaching the sensible conclusion that the plan sponsor
and its payroll, accounting, HR, and/or financial department employees typically
don’t stand to benefit from such communications).
As such, this provision in the final
rule represents a big win for plan sponsors and cause for celebration by ERISA
nerds and non-ERISA nerds alike. Vanguard was proud to stand with plan sponsors
in pointing out the proposal’s potential overreach and encouraging a more
workable alternative.
Because of the scope of the fiduciary
rule, Vanguard is spending considerable time wading through the DOL’s
regulatory package and analyzing its wide-ranging impacts to make sure we
identify all of its consequences (both intended and potentially unintended) for
our clients. To achieve this objective, we’re preparing a more detailed
analysis and will provide additional information about potential effects on
different types of institutions. But in this particular instance, we’re pleased
to report a good news story for plan sponsors.
About
John Schadl
John Schadl is a principal and head of Vanguard ERISA and Fiduciary Services, which provides legal counsel on retirement and fiduciary topics for the company's institutional and retail businesses. Previously, Mr. Schadl led Vanguard Strategic Retirement Consulting, which works with plan sponsors on fiduciary and regulatory issues. Earlier in his career, Mr. Schadl handled retirement savings tax and fiduciary issues as an associate at the law firm of Susanin, Widman & Brennan, P.C. He earned a B.A. at the University of Notre Dame and a J.D. at Villanova University School of Law.
John Schadl is a principal and head of Vanguard ERISA and Fiduciary Services, which provides legal counsel on retirement and fiduciary topics for the company's institutional and retail businesses. Previously, Mr. Schadl led Vanguard Strategic Retirement Consulting, which works with plan sponsors on fiduciary and regulatory issues. Earlier in his career, Mr. Schadl handled retirement savings tax and fiduciary issues as an associate at the law firm of Susanin, Widman & Brennan, P.C. He earned a B.A. at the University of Notre Dame and a J.D. at Villanova University School of Law.
