June 2017 HR Alert | Fiduciary Rule in Effect | Preventive Services Requirements | Upcoming Speaking Engagements

Upcoming Speaking Engagements


June 27th, The Benefit Company
July 27, Smith Communication Partners
August 17, Burnette Insurance
August 31, DOL Panel Discussion


What are the Requirements of Those Held to a Fiduciary Standard?

The Department of Labor (DOL) has implemented the first phase of its new Fiduciary Rule, extending the scope of retirement plan fiduciary duties. In part, the Fiduciary Rule aims to mitigate conflicts of interest that arise from financial advisors’ recommendations regarding retirement accounts. Because of the sweeping changes the Fiduciary Rule brings to the financial advice industry, it has been the subject of great controversy. The primary provisions of the Fiduciary Rule took effect on June 9, 2017, though certain exemption provisions will take effect on January 1, 2018.

Those held to a fiduciary standard are legally and ethically required to act in the best interest of another party. Before implementation of the Fiduciary Rule, fiduciary status only applied to employment-based retirement plans such as 401(k) and 403(b) plans. Under the Fiduciary Rule, any financial advisor providing advice regarding a tax deferred retirement account is held to the fiduciary standard. Individual retirement accounts like IRAs and Roth IRAs that were not covered under the previous standard now fall under the Fiduciary Rule.

Fiduciaries are legally required to act in the best interest of the advice recipient, and those who work with retirements accounts in any capacity must be aware of whether they are a fiduciary and how they might incur fiduciary status. Professionals working with retirement accounts can inadvertently incur fiduciary status by recommending investments or investment strategies. According to the Fiduciary Rule, a professional incurring fiduciary status can be held liable if his or her advice was imprudent or not in the best interest of the recipient.

Under the Fiduciary Rule, an individual becomes a fiduciary when he or she renders investment advice for a fee or other compensation. On its own this definition is overbroad and vague, so the Fiduciary Rule provides additional guidance as to what is and what is not investment advice. Under the new rule, investment advice includes recommendations regarding specific investments. Investment advice also includes higher level recommendations, such as those regarding investment policy, strategies, and portfolio composition. The definition of investment advice includes recommendations relating to assets within a retirement account. Examples include recommendations to distribute assets or roll over assets from an employer-based retirement plan to an IRA. These recommendations can be formal, such as advice rendered pursuant to a contract, or informal.

The Fiduciary Rule includes some specific exclusions, as well. Because the definition of investment advice includes communications directed at specific recipients regarding an investment or management decision, professionals who do not act in a direct advisory role may incur fiduciary status. Financial educators, investment journalists, and investment platform providers could be adversely affected, so the DOL includes numerous exceptions within the Fiduciary Rule that prevent fiduciary status from applying unintentionally. The most important exemptions included in the rule are highlighted below.

General Communications

The Fiduciary Rule states that communications are not investment advice if a reasonable person would not view the communication as investment advice. The rule provides numerous examples including talk shows, newspaper articles, and speeches. The DOL also specifies that general marketing materials and data describing market performance do not fall within the definition of investment advice.

Platform Providers

The Fiduciary Rule excludes financial service platform providers from fiduciary status, provided they meet certain requirements. Generally, to be excluded the platform provider must offer a neutral investing tool which does not favor certain financial products or investments over others. The platform provider must offer investment funds without regard to an individualized plan need. Financial service platform providers may identify investment options based on objective criteria and provide benchmark comparisons for each investment option. A platform provider’s financial interest in any identified investment options must be disclosed. In addition, those platform providers who are not providing impartial investment advice must disclose this fact in writing.

Investment Education

The most detailed exemption within the Fiduciary Rule concerns investor education. The rule attempts to discourage sales pitches disguised as educational seminars without disrupting neutral, even-handed investor education. Investor education broadly covers retirement plan information as well as general financial investment information. Plan information provided may describe the terms and operation of the plan, such as available distribution options and associated features, risks, and expenses, as well as the impact of increasing contributions and making early withdrawals. Providers of investment education may provide their services without the risk of incurring fiduciary status, provided the educator does not recommend specific investment products, investment alternatives, or other investment property.The substantial complexities, ambiguities, and implications of the Fiduciary Rule should not be taken lightly by plan sponsors or financial professionals. The rule and its exceptions include far greater nuance than can be addressed in a newsletter. Hall Benefits Law recommends that you seek the advice of ERISA counsel to determine how this rule will affect your company.


What Preventive Services Must Be Covered Under my Plan?

On March 13, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (the “ACA”). The ACA requires, in part, that non-grandfathered plans provide certain preventive services at no cost to plan participants when provided by a doctor or other provider in the plan’s network. The list of covered preventive services originates from recommendations made by four medical and scientific entities: (i) the U.S. Preventive Services Task Force (USPSTF), (ii) the Advisory Committee on Immunization Practices (ACIP), (iii) the Health Resources and Services Administration (HRSA) Bright Futures Project, and (iv) the Institute of Medicine (IOM) Committee on Preventive Services for Women.

New or revised preventive service recommendations made by the USPSTF, ACIP, HRSA, or IOM must be covered in the plan year beginning on or after the date the recommendation was made. The USPSTF and HRSA have recently revised recommendations with regards to the following:

Statin Recommendations
The USPSTF recommends that adults between the ages of 40 and 75, without a history of cardiovascular disease (CVD), use a low to moderate dose of Statin to prevent CVD, provided the individual has one or more CVD risk factors and a calculated 10-year risk of a cardiovascular event of 10% or greater. Screening for such risk may may require additional assessment. This recommendation is effective for plan years beginning on or after December 1, 2017.
Aspirin Use Recommendations
The USPSTF has revised its prior dosage recommendations regarding aspirin use, recommending initiating a low dosage of aspirin to prevent CVD and colorectal cancer in adults aged 50 to 59 years who: (i) have a 10% or greater 10-year CVD risk, (ii) are not at increased risk for bleeding, (iii) have a life expectancy of at least 10 years, and (iv) are willing to take the low-dose aspirin for at least 10 years. This recommendation is effective for plan years beginning on or after May 1, 2017.
Preventive Services for Women
On December 16, 2016, the HRSA announced nine recommendations in its 2016 Women’s Preventive Services Guidelines. Two noteworthy recommendations:
Cancer Screening
The HRSA recommends cancer screening as follows: (i) for women 21 to 29, a cervical cytology test once every three years, and (ii) for women 30 to 65, a cervical cytology test with Human papillomavirus test once every five years, or a cytology test once every three years.
Breast Cancer Screening for Average-Risk Women

For women in the average-risk category, mammography screening should begin no earlier than 40 and no later than 50 years old. The mammography should occur at least biennially and as frequently as annually, and it should continue through the age of 74 years old. Age should not be the sole basis to discontinue screenings.

These recommendations, along with the other seven included by the HRSA, are effective for plan years beginning on or after January 1, 2018.

Plan sponsors must ensure their health plans implement the new requirements. Penalties for failing to implement preventive service recommendations under the plan include an excise tax of $100 per day for every individual to whom the failure relates.

Hall Benefits Law recommends you seek the advice of ERISA counsel to ensure your plan complies with the new requirements outlined above.

Be in the know. You can find all of our previous HR Alerts and more on our website at www.hallbenefitslaw.com.

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