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New DOL Fiduciary Rule is Here – Effective June 9th, 2017

June 8th, 2017

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You could be liable!

Are you aware that Investment Committee Members and Fiduciaries on plans that are making fiduciary decisions can be held personally liable for those decisions?

No matter what happens with the new DOL Fiduciary Rule, this process should be a wake-up call for every officer or director whose company has an Employee Retirement Plan but does not have Fiduciary Liability Insurance or Directors and Officers Liability Insurance in place.

Although the purpose of this article is not to dissect the rule, it is important to understand the integral parts of the rule:

1. All 401(K) advisors must serve as fiduciaries and:

  •  Give advice that is in the investor’s best interest
  • Charge no more than reasonable compensation
  • Make no misleading statements about the transaction, compensation, or conflicts of interest

2. Best Interest Contract Required:

  • The best interest contract and onerous disclosure requirements go into effect January 1, 2018.

3. Conflicts of Interest Removed

4. Best Interest Contracts Exemption (BICE Loophole) *major increase in liability

Additional considerations:


1. Personal Liability – all committee members are personally liable as fiduciaries of these plans

  • This is no different than previously
  • Can be held liable for other fiduciaries’ breaches

2. Litigation Risk

  • DOL – no risk until January 1, 2018
  • Class-Action – risk is immediate

Industry Disruption

1. Advisors

  • 300,000 advisors in the U.S. serve retirement plans
  • Only 10-15% are ready for the change and conflict-free
  • New/Additional E&O fiduciary exposure for advisors

2. Employer/Plan Sponsor

  • Co-fiduciary arrangement with conflicted advisors creates high risk for sponsor fiduciaries (advisor’s conflicts become theirs as well)
  • More D&O and Fiduciary liability coverage needs for clients

Will your company be prepared? We recommend your company have a separate Fiduciary Insurance policy in addition to a Directors and Officers Liability Insurance policy, as we anticipate many class action lawsuits once the regulation becomes official.

Now is the time to secure these policies. As the 6th largest independent insurance intermediary organization in the world, Brown & Brown can help.

Download a copy of this alert.

Mark Zahoryin

Senior Vice President

Mark Zahoryin has over 30 years of industry experience and is responsible for production and service of medium to large commercial and industrial accounts.