DOL Proposes Delay for the Fiduciary Rule

After two-month extension, DOL may revise or rescind the controversial rule

Stephen Miller, CEBS By Stephen Miller, CEBS March 2, 2017

DOL Finalizes BICE Transition Period Extension to July 1, 2019

The U.S. Department of Labor (DOL) announced on Nov. 27, 2017, that it had finalized its proposed 18-month extension—from Jan.  1, 2018 to July 1, 2019—of the transition period for the fiduciary rule's best interest contract exemption (BICE) and other fiduciary compensation exemptions. The formal notice of action was published in the Federal Register on Nov. 29, 2017.

The DOL action leaves in place the fiduciary rule, which became effective as of June 9, 2017, including the revised definitions of "fiduciary" and "investment advice" that applies to employer-sponsored retirement plans under the Employee Retirement Income Security Act (ERISA) and to individual retirement accounts (IRAs) and similar accounts.

In announcing the extension, the DOL said that a delay was necessary to allow it to complete its examination of the fiduciary rule and the exemptions, to propose changes to the exemptions and/or propose alternate exemptions, and to coordinate with the Securities and Exchange Commission (SEC) and other regulators.

On March 1, the Department of Labor (DOL) proposed a 60-day extension of the applicability dates of the fiduciary rule and related exemptions, from April 10 to June 9, 2017. The potential delay is merely pending and cannot be made official until the proposal's comment period ends.

The DOL had been considering a 180-day extension, but instead opted for a shorter delay.

The proposed extension is intended to give the department time to determine whether the rule—which requires retirement plan advisers to put their clients' best interests first when recommending investments for 401(k) and other defined contribution plans—may adversely affect the ability of Americans to gain access to retirement information and financial advice.

The DOL will accept public comments on the proposed extension for 15 days following its March 2 publication in the Federal Register. The department invites comments as to the benefits of the proposed 60-day delay, including the potential reduction in transition costs should the DOL ultimately revise or rescind the final rule.

The DOL also invites comments on whether it should delay applicability of all, or only part, of the final rule's provisions and exemption conditions. 

A Narrow Time Frame to Act

According to fiduciary expert Peter Gulia of the Fiduciary Guidance Counsel law firm, the DOL is on a tight deadline to get a final rule published before the April 10 compliance date. The DOL needs to read and analyze all of the comments on the proposed rule delay within two or so weeks in order to have the new rule delaying the current rule published by early April.

DOL May Choose to Revise or Rescind

Arjun Saxena, a partner at consulting firm PricewaterhouseCoopers who has been following the debate over the rule, said he doesn't expect the Labor Department to rescind the regulation. More likely, he said, is that the department kills some parts of the rule "that are causing more heartburn than others," such as the private right of legal action and an industry exemption to the rule that many say is onerous and disruptive. The fiduciary rule "will survive, but probably in a modified form," Saxena said.
(Wall Street Journal

DOL Weighs the Cost of a Delay

"As part of its comment-seeking, the Labor Department specifically noted a desire to receive data on compliance activities already undertaken (sunk costs), and the potential change in start-up costs that would result from a delay in the applicability date," commented Nevin Adams, chief of communications for the American Retirement Association. "The Labor Department notes that, beyond start-up costs, the delay 'would likely relieve the industry of relevant day-to-day compliance burdens.' "
(National Association of Plan Advisors

Fiduciary Rule Affects Retirement Plan Sponsors

The rule affects compliance obligations and costs for plan sponsors, who would become responsible for ensuring that any advice they helped participants to receive was provided by investment advisors that adhere to the fiduciary standard under the Employee Retirement Income Security Act (ERISA)—putting plan sponsors at a higher risk of participant lawsuits and ERISA violation penalties if they fail to do so. Plan sponsors were advised to review and, as needed, revise their contractual agreements with investment advisors, including how fees paid by participants are structured.
(SHRM Online)

Enabling Trial Lawyers to Increase Profits?

Acting Securities and Exchange Commission Chairman Michael Piwowar, speaking March 2 at the Investment Adviser Association compliance conference in Washington, D.C., said that "For me, that rule was never about investor protection. It was about enabling trial lawyers to increase profits." He called for "a comprehensive discussion" of the fiduciary duty. But Knut Rostad, president of the Institute for the Fiduciary Standard, said that the Trump administration is placing "investors' interests are behind brokers' interests."
(Investment News)


[SHRM members-only toolkit: Designing and Administering Defined Contribution Retirement Plans]


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