“Employers are concerned with the potential for a sudden change in services provided to plan participants from record keepers, with limited time to supplement those services,” added Hansen.

Some employers are mistakenly operating under the presumption that the rule will have little consequence on how they administer plans, given that they are already fiduciaries.

That indifference could invite new angles of liability, says Duane Thompson, a senior policy analyst for fi360, a provider of fiduciary compliance services for advisors and plan sponsors.

“Plan sponsors can't just have a lazy eye and think this rule doesn't affect them because they already are fiduciaries,” Thompson told BenefitsPRO. “They need to understand the parts of this rule that can come back and bite them if they're not careful.”

As fiduciaries, employer sponsors are legally obligated to prudently select and monitor all plan service providers.

Come June 9, the challenge for sponsors will be understanding when their record keepers and advisors are acting as fiduciaries, and which services or actions may be provided under the rule's carve-outs.

“For some sponsors that can be confusing, because like retail clients, they implicitly assume plan providers are working in participants' best interests,” said Thompson.

Heightened monitoring responsibilities on service providers

One of the rule's primary purposes is to assure that 401(k) investors don't receive conflicted advice when it comes time to roll over assets to IRAs.

When Labor amended and delayed the first scheduled implementation date to June 9, it relieved the regulated community from the requirement of explaining to investors and employers, in writing, their role as fiduciaries.

That was pushed off until January 1, 2018, when the thrust of the rule is scheduled for implementation. By then, any advice on rollovers will be a fiduciary act, and must be accompanied by a comparative analysis of why the decision to roll over assets, or leave them in plan, satisfies the best interest standard.

That comparative analysis is not required for rollover decisions on June 9. But giving prudent advice that is in the best interest of investors is. In order to assure that the latter standard is met, Thompson says employers should give consideration to going beyond what is required to make sure they are not inviting fiduciary risk.

“How do you meet a prudent standard on rollover advice without a comparative analysis? Sponsors would be crazy to not keep records of how participants are engaging with record keepers and plan advisors on rollover advice,” said Thompson.

The risk for sponsors is their obligation to monitor plan providers.

If a call center employee is accused of giving fiduciary level advice that fails the impartial conduct standards required on June 9, then the sponsor faces potential liability for having failed its duty to monitor the provider. Sponsors also share co-fiduciary liability with 3(21) and 3(38) advisors.

Dominic DeMatties, a partner in Alston & Bird's employee benefits practice, says the most proactive sponsors are aware of how the June 9 impartial conduct standards rule will change record keepers' services, and are going to the extent of changing contractual agreements to assure protections.

But others are lagging. “It's a little hit or miss,” said DeMatties. “I'm concerned there's a lack of awareness among sponsors, and what might be communicated in call centers.”

Heightened monitoring responsibilities on HR

The rule attempts to clearly separate non-fiduciary investment education from fiduciary recommendations.

Any communication that would “reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular investment-related course of action” is regarded as a fiduciary recommendation, according to a Labor Department FAQ.

Beyond the rule's education carve-out, the Labor Department has issued FAQs intended to quiet concerns that sponsors and human resource team members may be subjecting themselves to fiduciary liability even by communicating in vanilla “benefits-speak” with plan participants.

In one FAQ, Labor says an employer can recommend that a participant increase contributions to maximize the employer match, without making a fiduciary recommendation. In order to rise to the level of a fiduciary recommendation, the one giving the advice must receive a fee or other compensation, and employers, and their HR teams, are not compensated for recommending higher contribution rates.

How far does an employer's fiduciary risk go?

Notwithstanding the guidance, DeMatties says many open questions remain as to how far an employer's fiduciary risk runs relative to how HR team members interact with participants.

“If an employee tells a participant they should really think about contributing at least 3 percent to get the full match, is that a fiduciary recommendation? Based on the rule's definition, it sure sounds like a suggestion to the participant to do something,” DeMatties noted.

From a liability standpoint, DeMatties is concerned that the intricate language in the rule itself could be interpreted differently from the hypothetical scenarios presented in the FAQs and other guidance.

“The FAQs won't protect a sponsor—even something an FAQ says is acceptable, the rule will trump it,” he said.

If an HR representative were to only communicate the naked facts of plan investing to participants, then that would be hard for anyone to construe as fiduciary advice, says DeMatties.

The problem and challenge for plan sponsors will be setting hard rules for how HR teams communicate with participants, and monitoring those interactions.

“If you work in HR you make your living trying to help people—that's why companies sponsor benefit plans. But it's human nature to not stop, and to give more information to help participants connect the next dot—'you should be contributing this much'. Doing so may ultimately be enough to cross the fiduciary line,” explained DeMatties. “It's slippery ground if people are not very careful in what they say.”

Protection amid the uncertainty

Admittedly, DeMatties says much of the speculation on new liability is theoretical. Whether or not sponsors will face new avenues of litigation under the rule remains to be seen.

But the rule does add to the list of potential violations that can be very hard to defend, he says.

As Labor undertakes its review of the rule, many are expecting it will ultimately be amended. DeMatties even thinks the impartial conduct standards requirement, set for enactment in a bit over a week, could be amended, but most likely at the margins.

What plan sponsors can do

Meantime, sponsors will have to ride out the uncertainty.

But they are not without recourse. Sponsors can ensure they are in communication with service providers, understand how services are changing, and add protections in contracts.

And they can ensure clear policies are in place with respect to those members of HR that have direct contact with plan participants, said DeMatties.

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