On Nov. 29, 2017, the DOL finalized an extension of the Fiduciary Rule’s (the Rule) transition period. As background, the Rule became effective on June 9, 2017. However, the best interest contract (BIC) exemption and other related prohibited transaction exemptions (PTEs) weren’t going to become effective until Jan. 1, 2018. The DOL has now finalized a rule that extends that transition period from Jan. 1, 2018, to July 1, 2019.
As we reported in the Sep. 6, 2017, edition of Compliance Corner, President Trump requested (in a Feb. 3, 2017, memorandum) that the DOL reexamine the Rule to determine if it’s harmful to American investors. Although the DOL was unable to further delay the effective date of the Rule (past June 9, 2017), they did request comments from the public on the Rule and on its review. Some of those comments expressed the fact that there wasn’t enough time between the applicability date of the Rule and the Jan. 1, 2018, applicability of the BIC and other related exemptions for the DOL to review the Rule. The DOL agreed and expressed a concern that without a delay in the applicability date, parties could incur undue expenses in seeking to comply with a law that could eventually change.
In addition to delaying the applicability of the BIC and other related PTEs, the DOL’s final rule also expressly delays the applicability of certain amendments to PTE 84-24, which allows an exemption for commissions paid to insurance brokers in connection with a plan’s purchase of insurance or annuity contracts.
Although enforcement of the BIC and other PTEs will be delayed, the DOL did stress that the impartial conduct standards imposed by the Rule became effective on the June 9, 2017, applicability date. So advisers must still give prudent advice that’s in the retirement investors’ best interest and charge no more than reasonable compensation.
This finalized rule also extends the temporary enforcement policy instituted by the DOL through Field Assistance Bulletin (FAB) 2017-02, which announced that the DOL won’t pursue claims against fiduciaries who are working diligently and in good faith to comply with their fiduciary duties.
Ultimately, the Rule is still under review by the DOL and they’ll likely use the new transition period to determine possible changes to the Rule. We’ll continue to monitor new developments and report on them in Compliance Corner.
Finalized Rule »
News Release »