The new fiduciary rule contains no definitive language to this effect, but we can't say it doesn't either.

Why not? Because the new rule states certain fee arrangements, while not banned outright, rise to the level of a potential prohibited transaction should the service provider fail to "disclose" the inherent conflict of interest.

Here's the tricky part. Although the rule refers to the "Best Interest Contract Exemption" (BICE), it fails to define the specific language that would be acceptable for a BICE. In fact, when pressed on this at the rule unveiling last year, the DOL Secretary at the time, Tom Perez, suggested the full meaning of the rule won't be known until the first class-action cases are tried.

In other words, the DOL apparently decided it didn't want to make the rules that went with the rule and they were just fine to have some random (or not-so-random) judge do the dirty work.

This is what folks in the biz call "uncertainty." While uncertainty has its merits in games of chance and dramatic productions, it's generally considered a less-than-perfect thing when it comes to compliance, regulation, and the inevitable legal squabbles that ensue.

In circumstances such as these, plan sponsors must be cognizant of the ever-present "unknown liability."

An unknown liability exists when there's a chance you can get in trouble without knowing it. For example, walking in the dark contains plenty of unknown liabilities, especially if it's in the middle of the woods with exposed roots, uneven terrain, and the usual crevice or two. You can't see anything in front of you and your next step might lead to disaster without warning.

OK, the situation isn't that dire for the plan sponsor, but it's not all bright sunshine and roses, either. There are unknowns. The good news is some of them are "known."

More precisely, there are certain scenarios we know may contain more unknowns than other scenarios. For example, it's true the fiduciary rule unambiguously targets those service providers previously not defined as a fiduciary.

Narrowing things down further, the rule focuses on specific fee models that contain obvious conflicts-of-interest (e.g., commissions, 12b-1 fees, and revenue sharing). We know plan sponsors that engage in these high risk relationships expose themselves to more unknown liabilities than those that don't.

It's critical, then, that 401(k) plan sponsors take the new fiduciary rule seriously. They should assess their current relationships in light of the new rule and determine the relative risks associated with those relationships.

Unlike the 2012 rule, they are under no strict order to "fire" non-compliant providers, in part because "non-compliance" is a fuzzy term. It is, however, quite easy to identify those fee provisions that the fiduciary rule addresses. While plan sponsors won't be able to determine the exact nature of their potential liability, they will at least be in a position to take an inventory of their possible exposure.

The DOL may seem like it's targeting service providers, but the true intent is to protect employee investors, and that means plan sponsors are on the hook, too. This is not the time for 401(k) plan sponsors to ignore the fiduciary rule. And when it comes to the tort bar, ignorance will be no excuse for the law.