Nova Files Comment Letter on Proposed Fiduciary Regulations

On July 21, 2015, Nova 401(k) Associates submitted a comment letter on the Department of Labor’s proposed fiduciary regulations.  After many years the Department of Labor proposed a new definition of fiduciary.  The definition of fiduciary had not been updated to reflect the great number of 401(k) plans.  The proposed definition is designed to better protect plan participants, and if adopted in its present form, a much greater number of professional and financial advisors will be fiduciaries.

Nova submitted a comment letter to the Department of Labor emphasizing three points:

  • Extend arms-length transaction to small plans – Nova recommends that the 100 participant requirement the arms-length transaction carve-out be removed or lowered to ten participants.
  • Clarify length of fiduciary status – Nova recommends that the length of fiduciary status be the longer of the time specified in the contract between the parties and the period for which the individual receives compensation related to the investment advice.
  • Safe harbor for resolving co-fiduciaries breaches -Nova recommends that the DOL provide a safe harbor method for small plan fiduciaries to resolve the most common co-fiduciary breaches. For example, with respect to failure to deposit 401(k) deferrals, the DOL should prescribe a method of reporting late or missing 401(k) deferrals to the DOL which would satisfy a small plan’s co-fiduciary’s responsibility to resolve the fiduciary breach.