Mark June 9, 2017 on your calendar. That's the day the lowly IRAentered the retirement plan big leagues. Previously, IRAs hadsignificantly less regulatory oversight than ERISA plans. But withthe redefinition of “fiduciary” in the DOL's conflict-of-interest(aka, “fiduciary”) rule, IRAs now fall under the ERISA regulatoryumbrella.

What does this mean for plan sponsors? Where will the change beseen by retirement savers? How will financial service providersrespond to this watershed event?

Traditional corporate plan sponsors are impacted by theconflict-of-interest rule. This impact will manifest itselfprimarily in the due diligence process of selecting and monitoringservice providers. The size of this impact will be directlyproportional to the percentage of service provider fees paid out ofplan assets. If the plan sponsor pays all plan fees out ofcorporate business accounts, the new rule will not apply. The ruleonly applies to service providers who are paid for out of planassets.

There is, however, a nuance in this where it's not completelycertain whether the plan sponsors will be held accountable. Thissituation occurs when an ex-employee rolls assets out of the planand into a personal IRA. It has not been determined (by case law,the way all such things are and will continue to be determined)whether the plan sponsor has any oversight responsibility tomonitor whether outgoing plan assets are being sent to properfiduciaries. It is likely plan sponsors may be held liable iffinancial firms receiving assets also have a fiduciary relationshipwith the plan, less likely if those firms have no pre-existingrelationship with the plan.

For retirement savers, the question of where the fruits of theconflict-of-interest rule will surface remains to be seen.Certainly, we can expect to see a new paragraph or two in clientagreements (this would be language addressing the best interestcontract exemption). However, because the rule won't be enforceduntil next January (at the earliest), there's no clear expectationas to when this language will begin appearing. Furthermore, if wecan use the DOL's 2012 “401(k) Mutual Fund Fee Disclosure Rule” asa guide, it's unlikely any changes brought forth by this 2017 rulewill be easily understandable. As a result, it's unlikely we'll seeany behavior modification on the part of retirement savers untilsome smart class action attorney finds an opening.

Lastly, whither the financial service professional? They appearto be caught in some hazy limbo. Any wrong step can send themtumbling into the abyss of a fiduciary breach. The trouble is, theground is so foggy, it's hard to see where you're stepping.

We know the intent of the DOL is to embrace IRAs with the sameregulatory arm as corporate retirement plans. Cautious serviceproviders will accept this inevitability and begin treating IRAswith the same kid gloves they use with DB and DC plans. Any otherstrategy entails unknown risk. The fiduciary rule means IRAs and401(k)s are the same thing.