Fred Reish Comments on New Fiduciary Rule Taking Effect

ThinkAdvisor reported on the Department of Labor’s (DOL) announcement that its fiduciary prohibited-advice exemption, to align with the Securities and Exchange Commission’s Regulation Best Interest, will go into effect Tuesday, Feb. 16, 2021.

In the article, “Trump DOL Fiduciary Rule to Take Effect Tuesday,” the publication spoke with benefits and executive compensation partner Fred Reish about the department’s decision to move forward with the rule. Reish explained that the DOL had been meeting remotely with representatives of financial sector trade associations and consumer groups to ask whether the rule should be allowed to go into effect.

Reish said the groups “felt that they could live with the rule and were concerned that a delay could result in a harsher rule. The consumer groups felt that the rule was fairly robust, though not perfect. However, they believed that later this year the DOL would begin work on a more robust fiduciary definition and that would cover their concerns.”

While the exemption is fairly robust, Reish added that later this year the DOL will likely “start a regulation process to expand the [fiduciary] definition. It’s not clear if the [Trump-era] exemption will be changed, but I think it’s almost certain that a new regulation of the definition of fiduciary advice will be proposed,” and “drafted carefully to avoid the [U.S. Court of Appeals] 5th Circuit decision that vacated the Obama-era regulation.”

Lastly, Reish noted that the DOL has announced that it is taking a fairly aggressive interpretation of ‘fiduciary.’ For example, “in most cases, a rollover recommendation to a participant will be fiduciary advice,” explained Reish. “In a sense there are two ‘rules’ — the exemption and the interpretation.”