There is a general belief that advisers acting as fiduciaries to a 401(k) plan would violate ERISA if they advise participants on IRA rollover opportunities and wind up managing those rolled over funds. That opinion is not surprising, according to ERISA attorney Marcia S. Wagner of the Wagner Law Group. But it is not necessarily correct.

Speaking this week at the 2013 NAPA/ASPPA 401(k) summit, Wagner acknowledged that the DOL’s advisory opinion 2005-23A that addresses this subject, superficially interpreted, would give the impression that under no circumstances could an adviser do so without triggering a prohibited transaction that could disqualify the plan -- a risk that no adviser would want to take. The DOL is extremely attentive to any action that would amount to self-dealing, she noted.

But a part of that advisory opinion that is generally not examined, she said, essentially creates a blueprint for how advisers can provide that service without violating the law.  The legal underpinning for part of the opinion stems from Varity v. Howe, a benefits case that reached the U.S. Supreme Court.  The employer in that case tried to establish that it wasn’t liable under ERISA for egregious behavior on the part of some key employees in advising participants to pursue a course of action that executives knew would not end well for the participants. In rejecting the employer’s argument, the Court established a three-pronged test related to communication with plan participants establishing liability under ERISA that advisers can use in the rollover advice situation.

1) The factual context of the communication -- is it in a plan-related setting (e.g.,at a meeting with plan participants at the company site)?

2) Do the people speaking have plan-related authority?

3) How plan-related is the nature of the communication itself?

“You want to be sure you fail all these tests,” Wagner explained.

The ruling essentially provided a way for advisers to carve out there role as fiduciaries to the plan, from other normal activities they can conduct as advisers independent of their role as plan fiduciaries.

Wagner and fellow presenter Charles D. Epstein (a plan adviser and also consultant to advisers as “The 41(k) Coach,” have created a “toolkit” that gets into the details of steps advisers need to take. But nub of the matter, they said, boils down to this: Establishing and living by a strict set of procedural guidelines. Procedures needed to satisfy the three-part test:

1) When speaking to participants as a group, speak only about rollover-provisions of the plan document, and do not proffer any advice about the wisdom of rollovers, or how they might go about doing a rollover. Such conversations should only occur outside of the employer’s place of business, if a participant pursued personal advice on rollover options.

2) In advance, have the plan sponsor sign a document stating that any rollover services provided by the adviser are not offered under the adviser’s authority to provide plan services.

3) Have participants sign an acknowledgement that they understand that any rollover services are a non-plan related service.

Without all three procedures followed, the risks of proceeding are too great, Wagner said. “This area is evolving. It is important to be conservative.”


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