Monday, 27 February 2017 13:29
Will the DOL Fiduciary Rule be Delayed? Maybe, Maybe Not.
Written by Juliet Fitzgibbons Guest Article by Kristen Deevy, Managing Director of Strategic Retirement Partners
On Feb. 3, 2017, President Trump drafted a memorandum to the DOL, directing that they delay implementation of the Conflict of Interest Rule (The Rule) for at least 180 days. The Rule, which was set to take effect on April 10, 2017, expands ERISA’s definition of “fiduciary” under retirement plans by identifying additional forms of communication that would constitute investment advice and would deem the giver of such advice a fiduciary under ERISA.
However, the official White House memo to the DOL was released after close of business on Friday February 3rd, and it is devoid of a directive that delays the applicability of the DOL’s Conflict of Interest Rule. It also does not suggest that the DOL request a stay in the litigation concerning the rule. The memo does, however, direct the DOL to analyze the possible impact of the rule. Specifically, the memorandum instructs the DOL to determine whether the Rule will adversely affect Americans' ability to gain access to retirement and financial advice. That review should include an economic and legal analysis of the Fiduciary Duty Rule.
Although the memo did not include a required delay, the DOL has come forward saying that they will consider whether to delay the applicability of the rule. However, until they provide additional information, the applicability date of the rule is still April 10, 2017. Because the Fiduciary Duty Rule was finalized and published, its repeal is a complicated process that cannot be achieved through Presidential Memorandum alone. The White House will have to work with the DOL and Congress to make any permanent changes to the Rule.
Many announcements that came out on Friday the 3rd relied on a previous version of the memo released by the White House, which stated that the rule was delayed for 180 days. Clearly, the 180-day delay was specifically removed from the final version.
However on Feb. 9, the DOL filed a Notice of Proposed Rulemaking with the Office of Management and Budget (OMB) to delay the rule's April 10 implementation date. The notice didn’t state the proposed period of delay, but an unpublished draft of the president's memorandum referred to a six-month delay, which most commentators believe is the delay the DOL is seeking. The proposed delay will be subject to a public comment period, which, based on the current compliance deadline, we would expect to be short — approximately 15 days. However, details on the plan will not be available until the OMB approves the rulemaking proposal and the DOL publishes the proposed delay in the Federal Register.
The OMB typically takes 10 to 14 days to review a proposed rule, and publication in the Federal Register typically occurs one to two days later. Accordingly, we would expect to see the proposed delay sometime very soon and, following the comment period, the delay implemented approximately two weeks later.
We’ll continue to update you on the status of the rule and the proposed delay. As things stand today, the April 10 date may or may not remain in place, and so does our collective uncertainty as to its future.
At the end of the day, employers may still want to ask their advisors key questions such as:
- Will you sign on in writing as a fiduciary to our plan?
- Do you receive un-level compensation? Or does the advisor get paid higher compensation for recommending certain funds over other funds?
While the regulation may or may not take effect, it is still important for employers to understand the role their advisor plays in relationship to their retirement plan. Putting the best interest of employees and their beneficiaries first is still a prudent process for employers to be adhering to.
The advisors of Strategic Retirement Partners (SRP) continues to believe that a fiduciary standard is important for the retirement system, and the American workforce it supports. Please know that the advisors of SRP strive to put the interests of our clients and their participants first. Many of the provisions of the proposed regulation were adopted by SRP years ago. We do not sell any other lines of business such as insurance, benefits, or banking that conflict with our retirement advice. SRP will continue to monitor this situation as it develops and will report on any additional changes. Stay tuned!
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Strategic Retirement Partners is not affiliated with Kestra IS or Kestra AS.
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Juliet Fitzgibbons
Juliet joins Fall River as an Account Executive and brings over 15 years of prior broker and account management experience. Her experience brings extensive knowledge on employee benefit programs, account management and creative cost-saving strategies and compliance solutions for employers of various sizes.
She is responsible for new business proposals, client renewals including plan benchmarking, rate analysis and mid-year reviews. She helps clients navigate healthcare systems and educates employers and employees through open enrollment meetings and day-to-day service requests. Juliet joined Fall River in 2015.