August 14, 2017

Department of Labor Submits a Proposal to Delay the Transition Period and Applicability of the Fiduciary Rule

At Arnerich Massena, we are proud that we have always been ahead of the curve on this issue, acknowledging fiduciary status since our inception and offering independent, unbiased advice to retirement plans. Regardless of the outcome of the rule’s delay, we will continue to acknowledge our fiduciary status and work in the best interest of Arnerich Massena clients and clients’ retirement plan participants.

The Department of Labor’s (DOL) fiduciary rule has met with several delays since it was finalized in 2016. While some of its basic provisions went into effect on June 9, 2017, the remainder looks like it may be delayed once again. On August 9, the DOL gave notice that it submitted a proposed extension for review. The proposal requests an 18-month extension of the applicability dates for several aspects of the regulation, including the core portions of the best interest contract exemption and prohibited transaction exemption.

The original fiduciary rule was initially set to go into effect on April 10, 2017, but a Presidential Memorandum pushed the applicability date back, requesting an in-depth review of the regulation and its potential impacts. Phase one of the rule, which requires financial advisors who provide retirement advice to act in their clients’ best interest, took effect on June 9, 2017. The January 1, 2018 date of compliance for the rest of the rule is still in effect now; if the new proposal is accepted, it would delay the compliance date by 18 months to July 1, 2019.

The proposed delay is a proposal only and does not have a legal effect, but the industry expectation is that the proposal will be approved and the applicability date delayed. The delay will allow additional time to scrutinize the second part of the regulation, which is more controversial.

While the DOL has not yet published its proposal, you can read the administrative action filed as part of a legal brief in a Minnesota lawsuit notifying the court that it had submitted a proposed extension here:

https://www.psca.org/thrivent-financial-for-lutherans-case

The Office of Management and Budget (OMB) received the proposal on Wednesday, August 9, and has listed it as “economically significant” on their website. Once the OBM completes their review, the proposal will be published in the Federal Register.