April 20, 2017

Delays in DOL's Fiduciary Rule

The Department of Labor (DOL) has issued a final rule delaying the “applicability date” of the final fiduciary rule and the related prohibited-transaction exemptions. Most of the elements of the fiduciary rule were to be applicable on April 10, 2017, with the remainder applicable on January 1, 2018. (See Sibson’s April 7, 2016 hot topic for details of the final fiduciary rule, and the March 2, 2017 hot topic for information about the DOL’s proposed rule to delay the applicability date.)

Under the new guidance, the applicability date of the fiduciary rule is delayed 60 days until June 9, 2017. On that date, the new definition of investment fiduciary under Section 3(21)(A) of the Employee Retirement Income Security Act (ERISA) becomes applicable, as do the related exemptions. However, for three of the exemptions — the Best Interest Contract Exemption, the Principal Transaction Exemption and Prohibited Transaction Exemption 84-24 — only the part that that requires advisers act in the best interests of participants is applicable between June 9, 2017 and January 1, 2018. Consequently, investment advisors do not have to implement the other parts of the exemptions, which include requirements to make written representations of fiduciary compliance, to enter into best interest contracts with participants, and to provide warranties about firm policies and procedures, until January 1, 2018.

The DOL is still considering the comments and information it received during the comment period that ended April 17, 2017. Those comments relate to the February 3, 2017 Presidential Memorandum, which instructed the DOL to review the fiduciary rule and its regulatory impact analysis to determine if the rule meets the Trump Administration’s priorities.

In light of the ongoing review and the Administration’s position, whether the new definition of “investment fiduciary” and the “participant-best-interest” standard will, in fact, become applicable on June 9 is not clear. Some providers of investment advice have already implemented the new fiduciary rule and are urging the DOL to apply the rule on June 9. Participant groups are also urging a June 9 applicability. On the other hand, there is strong urging from other investment-advice providers and employers to delay the June 9 date to either January 1, 2018 or indefinitely while the DOL conducts a new economic-impact analysis.

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