February 4, 2016

DOL Sends Final Fiduciary Regulation to OMB for Review

On January 28, 2016, the Department of Labor (DOL) sent its final regulation defining "fiduciary" for plan investment purposes (also known as the "conflict of interest" regulation) to the Office of Management and Budget (OMB) for approval. Although the terms of the final regulation are not known at this time, it is expected to address many of the technical concerns raised about the proposed regulations during the comment period and at the public hearings. However, DOL is not likely to have changed its fundamental approach.

Because this is the final year of the Obama Administration, the DOL is facing certain time constraints in issuing the regulation. The OMB has 30 to 120 days to approve or reject publication of the regulation. Because this is a “major regulation,” it cannot be effective until at least 60 calendar days after it is published in the Federal Register. Once published, the regulation is subject to a separate Congressional review period that can be significantly longer than the 60-calendar-day period. In general, Congress can prevent a regulation from becoming effective if it passes a joint resolution and the President does not veto the joint resolution. If the Congressional review period for this regulation is not over before Inauguration Day, the Congressional review process starts over in the new Congress. 

Whatever the legal “effective date,” the rule will not have to be applied for some time. In the proposed regulation, the DOL stated that it would delay the “applicability date,” or the date when compliance is required, for at least 8 months. Further, many expect the DOL to delay the applicability date of specific provisions (such as certain rules affecting IRAs) even further in order to allow appropriate time for business redesign and system changes.

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