Language in the Department of Labor’s proposed conflict-of-interest rule, which would expand the fiduciary status to advisors of 401(k) plans with less than $100 million in assets, will have significant impact on how advisors communicate basic plan information.

A team of ERISA experts at Drinker Biddle has published a client alert laying out just what the rule would mean for participant communications, assuming the proposed rule were enacted.

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Any communicated “recommendation” would trigger fiduciary status, according to the alert.

Which is to say that any communication that could be “reasonably” viewed as a “suggestion” that a participant move in or out of an investment would constitute fiduciary advice, according to the attorneys, citing language from the proposal.

“Under this standard, many common sales and investment education practices would constitute fiduciary advice.” Fred Reish and Brad Campbell, former Assistance Labor Secretary and chief of the Employee Benefits Security Administration, co-authored the piece.

Under the DOL’s proposal, most communications would be regarded as suggestions, say the attorneys. That would be a change from ERISA and the DOL’s current guidelines, which requires a mutual understanding on behalf of participants that investment advice is being given to enact ERISA’s fiduciary protections.

Also, under the DOL’s proposal, advisors would only have to have a one-time relationship with a plan or participants in order trigger fiduciary status. Under existing regulation, advisors must be providing “on-going” advice in order to be held to the higher fiduciary standard.

The DOL does create an “education carve out,” which intends to allow financial education for participants without triggering fiduciary status for the provider delivering it.

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But the carve out is “narrowly crafted,” say the attorneys, and they warn broker advisors or providers of education materials to take steps to ensure materials don’t unintentionally trigger fiduciary status.

Existing guidance from the DOL says plan communications are educational, and don’t constitute advice or trigger fiduciary status, when they are about plan information, general investment information, asset allocation models, and interactive investment materials.

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The new proposal includes those benchmarks, but adds greater imperative on providers of education to only give “investment-neutral” advice, according to the attorneys.