The Department of Labor (DOL) has issued a proposed rule that could delay the applicability date of the Fiduciary Rule from April 10, 2017, until June 9, 2017. It is too early to know whether the proposed rule will become final before April 10, 2017, and interested parties should note that the proposed delay does not yet affect the April compliance date. Check out our timeline of the key dates and review process for the proposed delay.
What is the Fiduciary Rule?
In April 2016, the DOL published a final regulation changing the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code) to generally apply to anyone who provides investment recommendations or advice to retirement plan investors for a fee. To avoid prohibited transactions under ERISA and the Code, the DOL also created new prohibited transaction exemptions, such as the Best Interest Contract Exemption. Read more about the Fiduciary Rule.
What would be delayed?
If finalized, the proposed rule would delay the applicability date of the new definition of fiduciary and the corresponding prohibited transaction exemptions until June 9, 2017. The proposed rule would not delay later Fiduciary Rule deadlines, including the January 1, 2018 deadline for full compliance with the Best Interest Contract Exemption.
The DOL is requesting this delay to determine whether it will propose a revision or repeal of the Fiduciary Rule.
Will the delay become effective before April 10, 2017?
It is too early to tell. There will be a public comment period on the proposed rule from March 2-17, 2017. This leaves the DOL three weeks after the comment period ends to complete the final review process and publish the final rule in the Federal Register. The Labor Secretary nominee has not yet been confirmed, and the DOL review process is likely to take longer than expected because of comments issued by the Office of Management and Budget.
Despite these challenges, if the DOL completes its required review and issues the final rule before April 10, 2017, the 60-day delay would take effect immediately upon publication in the Federal Register. It remains to be seen whether the Securities and Exchange Commission and the DOL will harmonize their approaches to the definition of fiduciary.
What comments are being requested by the DOL?
The DOL is asking for comments between March 2 -17, 2017, on the impact of the 60-day delay and whether all or only a portion of the Fiduciary Rule should be delayed.
The DOL is also seeking comments between March 2-April 17, 2017, about the economic impact of the Fiduciary Rule more broadly, in order to address concerns raised in a presidential memorandum issued on February 3, 2017.
What should impacted parties do?
Follow our news alerts to stay informed on any updates. As of today, the Fiduciary Rule is scheduled to take effect on April 10, 2017.