DOL's Fiduciary Duty Rule Survives Year-End Appropriations Process

The insurance industry’s short-term strategy to oppose the Department of Labor’s proposed investment advisor fiduciary duty rule centered on a defunding initiative as part of the year-end appropriations process. That defunding initiative dropped off the table in the appropriations endgame, and so with the omnibus appropriations bill on deck today and Congress leaving D.C., the ball will be back in the Labor Secretary’s court.

What’s at Stake?

FaegreBD has previously outlined the compliance and business implications of the DOL’s proposed rule. Insurance agents, brokers and other consultants providing advice with respect to retirement plans and IRAs may suddenly be deemed fiduciaries. Annuity writers and agents may be faced with new compliance, compensation and disclosure requirements.

What’s Next for the Process?

The final rule is not yet promulgated. Some public statements suggest DOL is looking at the first quarter of 2016. And there are still a few alternative paths to the rule being adopted. The DOL could allow for additional comment, although the agency threw a wet blanket on that prospect in response to a letter from congressional democrats.

The expectation is that the DOL’s goal is to enact a rule early enough in 2016 to be effective later in calendar year 2016.

What Are the Key Open Questions?

Details to come: To state the obvious, we won’t know what the final rule says until it is adopted. Industry comments have asked for specific changes responding to key concerns. Meanwhile, some media reports point to the DOL narrowing the class of annuities that could take advantage of the more attractive “84-24” exemption and pushing more of them into the substantially more burdensome “BIC” exemption. (These exemptions were described in our previous alerts.) 

Eye on the calendar: The administration is committed to promulgating the rule before President Obama leaves office. The current proposal would be effective eight months after being adopted, which means that we are looking to the first quarter and that any advocacy for delay or change is undertaken with urgency.

Other advocacy: As important as the appropriations strategy was, it was not the only defensive play in the DOL rule opponents’ book. Many Democrats in Congress have also expressed reservations about the rule. Can they prevail to slow down or substantially change the rule? And, unsurprisingly, litigation strategies remain an option, which no doubt would come with requests for injunctive relief.