April 8, 2016, the DOL finalized its fiduciary regulations and, among other things, expand the definition of who is an ERISA fiduciary to those providing “investment advice” with respect to Health Savings Accounts (HSAs). As a result, the new guidance regarding what constitutes investment advice and the rules for best interest standards apply to HSAs in the same way in which they apply to IRAs, 401(k) and other retirement plans.
There is exclusion for health insurance policies, disability insurance policies, term life insurance policies and similar assets that do not include an investment component from the final rule definition of “investment property.”
Two types of advice will trigger fiduciary status when provided for a fee or other compensation: (1) recommendations to buy, sell, hold, or exchange securities or other investment property, or regarding how to invest securities or other property following a rollover, transfer, or distribution; and (2) recommendations on managing securities or other investment property, including investment policies, portfolio composition, selection of other persons as investment advisers or managers, selection of account type (e.g., brokerage versus advisory), or recommendations about rollovers, transfers, and distributions (including whether to make, amount, form, and destination).
The key aspect of this definition is whether or not a recommendation is made. According to the rule, a recommendation is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the participant engage in or refrain from taking a particular course of action. The more specific and individually tailored the communication, the more likely the communication will be viewed as a recommendation and therefore fall under the provisions of the fiduciary rule.
The DOL listed three types of relationships that must exist for a recommendation to trigger fiduciary status. This includes both direct and indirect recommendations in exchange for a fee or other compensation. If a person: […]