Benefits

DOL Makes 5th (But Possibly Not Final) Request for Comments On Fiduciary Rule

The U.S. Department of Labor (DOL) on June 29 issued its fifth request (82 Fed. Reg. 31278) for public comments on the agency’s fiduciary definition and related exemptions, which took effect June 9. But the latest request for information (RFI) by the DOL since the rule’s inception in October 2010 may not be its last.

The first round of comments on the suitability of the January 1, 2018, applicability date for full compliance with the rule’s Best Interest Contract Exemption (BICE) and other transaction exemptions are due to the DOL’s Employee Benefits Security Administration (EBSA) by July 21. Commenters submitting responses on all other substantive aspects of possible changes to the rule get until August 7.

Another Round Possible

A possible sixth call for public comments could follow any proposed changes to the fiduciary Final Rule, any of its exemptions, or the potential delay of the early 2018 applicability date. Many interested parties in the retirement plan industry are now preparing their seventh or eighth public comment letters on the DOL fiduciary rule.

In addition, the Securities and Exchange Commission (SEC) on June 1 (see June story) got into the act of examining standards of conduct for investment advisers, after long being overshadowed in the area of fiduciary oversight by the DOL, with its own call for public comments.

Newly appointed SEC Chairman Jay Clayton announced the request aimed at protecting retail investors shortly after new Labor Secretary Alexander Acosta’s decision to let the Obama-era DOL final fiduciary rule become effective through phased implementation on June 9, although it remains under review by the DOL at the direction of President Trump. The SEC request for comment on the standards of conduct applicable to investment advisers and broker-dealers when providing investment advice to retail investors was seen as potentially adding more uncertainty to an already-confused regulatory issue.

‘Uncommonly burdensome’

“Unquestionably, this rulemaking process has become uncommonly burdensome for both proponents and critics of the [DOL] Final Rule,” said international law firm Eversheds Sutherland (US) LLP in an early July client bulletin. “At least in the short term, this process is imposing unquantified inefficiencies and costs on the operation of the private retirement system, which ultimately are borne by the participants in that system,” the firm said.

The June 29 RFI differs from EBSA’s March 2 request for comments—directed in part to delaying the applicability date for the Final Rule to June 9 from April 10—in the attention it gives recent market developments, and the possibility of new exemptions.

Topics in DOL RFI

Topics for which the DOL is seeking comment in the June 29 RFI include:

  • The effects of delaying the January 1, 2018, compliance date;
  • The definition of fiduciary “investment advice”;
  • Alternative streamlined exemptions;
  • The BICE and the Principal Transaction prohibited transaction exemption (PTE); and
  • PTE 84-24, which provides regulatory relief to insurance agents and brokers, pension consultants, insurance companies, and investment company underwriters who are fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) or under the federal tax Code who receive payments from third parties in connection with transactions involving an ERISA plan or individual retirement account (IRA).
Jane Meacham is the editor of BLR’s retirement plan compliance publications. She has nearly 30 years’ experience as a writer/editor of financial services news.