On June 21, the Fifth Circuit Court of Appeals’ decision (“Decision”) to vacate (effectively nullify) the 2017 Department of Labor (DOL) Fiduciary Rule (“2017 DOL Rule”) became effective. The Decision re-characterizes when TIAA and others in the industry are acting as fiduciaries for ERISA plans and their participants.
From an ERISA plan sponsor perspective, TIAA no longer needs to modify investment menu conversations based on the institution’s status as a “Sophisticated Fiduciary.”
The most significant impact from a participant perspective is that recommendations on rollovers, consolidations and distributions will no longer be generally considered fiduciary investment advice under ERISA.
A number of the process enhancements TIAA implemented in response to the 2017 DOL Rule will remain in place when interacting with our clients because they align with our core value of putting our mutual clients and their plan participants first and will help us respond to other developing fiduciary regulations.
Plan sponsor implications
The 2017 DOL Rule expanded the instances where TIAA could be considered a fiduciary under ERISA when interacting with plan sponsors about their plan investment menus.
With the elimination of the 2017 DOL Rule, TIAA no longer needs to limit conversations about plan investment menus with clients that do not qualify as a “Sophisticated Fiduciary” (e.g., $50M and above in assets held, managed or controlled, or any size if working with a registered investment advisor or registered broker/dealer, bank or insurance company).
The main implication of the Decision for participants is that recommendations on retirement plan consolidations, rollovers/transfers and distributions that were considered fiduciary in nature under the 2017 DOL Rule are no longer generally considered fiduciary advice under ERISA. Nevertheless, a number of the process enhancements we implemented in response to the 2017 DOL Rule will remain in place, because they align with our core value of putting our clients first.
The Decision does not change our status as an ERISA fiduciary when providing objective in-plan investment allocation advice by phone, online and one-on-one to plan participants where plan sponsors authorized us to do so. This type of advice has been available to our clients for more than a decade and is sourced through Morningstar Investment Management, LLC as an independent financial expert.
TIAA will also continue to provide:
- Research-based education programs to help participants make informed investment decisions
- Retirement Plan Portfolio Manager, our discretionary fee-based managed account service
- Advice on complex financial situations beyond retirement plans through specialists on topics such as trust services, estate planning, insurance, and portfolio management
Putting our clients’ interests first remains a TIAA core value. We will maintain procedures to ensure this remains our first priority, with an eye toward enhancing the experience when appropriate. TIAA is prepared to work with you to address any mutual client concerns as a result of the Decision.