This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

If you are currently taking advantage in your workplace's retirement contribution plan, changes are coming to that 401k or Roth 401k, you've been diligently putting funds into. On April 8, 2016, the Department of Labor (DOL) passed a new rule that, "affects how investment advice is provided to every 401(k) plan, every IRA, and every rollover or distribution to or from either," according to a U.S. Chamber of Commerce issue brief.

This long-awaited rule was put into place to protect retirement investors and it will most directly affect the person or group of people who select and administer your company-sponsored retirement plan, says Mike Haynes of TrueNorth Retirement Services.

"Essentially, the rule will hold the stewards of your retirement plan legally accountable to act in the best interests of the plan and its investors. This means that there will be increased pressure on your HR manager, or plan sponsor, and the advisor servicing your plan to make sure it abides by new regulations," Haynes says.

In light of this new rule, the standards for the folks administering your company's retirement plan have been raised. You may be surprised to learn that prior to the release of this regulation, individuals who sold investments to retirement plans had no duty to act in the best interest of their clients. However, with the new definition of fiduciary, that is no longer a concern for investors, unless the adviser choses to file an exemption.

Yeah, yeah - but what do I need to do?

"The best thing that you can do as an investor is to first enroll and contribute consistently in your company's retirement plan, if you aren't already," Haynes says. "It's a startling and terrifying reality that the majority of American workers are unprepared for retirement." In fact, a survey from the Employee Benefit Research Institute found four out of five Americans are unprepared for retirement. With 54 percent of Americans having less than $25,000 saved and 26 percent with less than $1,000. *

The second step investors can take is to ask questions and educate themselves.

Questions you may consider asking your HR manager:

Is our plan managed through an RIA or a Broker Dealer? Are they considered a fiduciary?

What is the expense ratio of the funds in our retirement plan? Is it reasonable?

These questions are important because the differences between RIAs and Broker Dealers have become more essential to understand under the new rule change, Haynes explains. And you'll also want to understand your plans' expense ratios, which can ultimately affect your earnings.

Ok so what is a RIA?

A Registered Investment Advisor is someone who has completed the qualifications to be registered with the SEC and with applicable state agencies. An RIA charges fees but does not make commission based on market transactions. A RIA can make trades on your behalf, and aid in transactions.

The most important thing to know about a RIA is that he or she is required by law to act as a fiduciary to clients. This means that the client's benefit is the most important thing to be considered when making recommendations. RIAs are required to meet certain standards, and this is enforced by law. When you receive advice from a RIA, you can be reasonably sure that the recommendation is what he or she thinks is really best for your situation.

And a Broker Dealer?

A broker dealer is someone who facilitates investment transactions. In most cases, a broker dealer receives his or her compensation through commissions. These commissions are based on investment transactions made on your behalf.

A broker dealer isn't required to meet fiduciary standards. The broker dealer can recommend investments that give him or her a bigger commission, even if there is a product that might actually be better for your situation. The SEC requires broker dealers to make "suitable" recommendations, as well as let you know if there are any conflicts of interest.

And about this Expense Ratio?

On top of acting in your best interest, sponsors of your retirement plan have a duty to keep fees known and reasonable. Ask your HR manager about the expense ratio, and when it was last evaluated and benchmarked. "We have become desensitized to the fees that inundate us on a daily basis (cell phone fees, credit card fees, airline processing fees, services fees, concert ticket fees, etc.). However, when it comes to our retirement accounts, we should pay special attention to the various fees that we pay because, over time, they can substantially reduce the overall value of the account."

At the end of the day, this rule change is meant to protect the retirement investor. Some may fear that the DOL ruling will increase the cost of retirement plans or make education harder to come by. However, Mike feels that, "by increasing the standards, the industry will shift back to the way we have doing business for years: with honesty, transparency, and centered around helping Americans retire."

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Mike Haynes is the Director of Retirement Plan Services at TrueNorth Retirement Services where his focus is is on providing better retirement plans to small and mid-sized companies in Utah. Believing that the retirement plan industry has failed the 401(k) participant, Haynes' objective is to bring sophisticated academically-based investment methodologies at a lower cost to companies, enabling them to support their employees' retirement goals and comply with the law.

* Helman, Ruth. "The 2016 Retirement Confidence Survey: Worker Confidence Stable, Retiree Confidence Continues to Increase." EBRI. March 2016.

fi•du•ci•ar•y:

responsibility to act in the best interest of plan participants – at all times

ex•pense ra•tio:

the annual cost of owning the fund, divided by your investment