April 27, 2021

ThinkAdvisor Seeks Insight From Fred Reish on the Impact of the DOL’s Fiduciary Rule

In “New DOL Fiduciary Rule Creating ‘Regulatory Whiplash’: Attorneys,” benefits and executive compensation partner Fred Reish spoke to ThinkAdvisor about the Department of Labor’s (DOL’s) recently released FAQ that lays out next steps regarding its fiduciary prohibited transaction exemption (PTE).

Reish said that in the preamble to PTE 2020-02, “the DOL ‘re-interpreted’ a 1975 regulation that defines fiduciary advice but did not amend the regulation. In effect, the only ‘regulation’ that defines fiduciary advice is the 1975 one.”

With the new FAQ, Reish also outlined what the DOL says it will do, such as instituting changes through rulemakings or sub-regulatory guidance. For example, “Among those other exemptions is PTE 84-24, which relates to the sales of insurance policies and annuities to plans and IRAs,” he said.

Reish agreed that “it does create some concern if they make major changes, particularly if those changes are announced close to Dec. 21, and there isn’t a delayed compliance date.”

However, if the DOL does “make significant changes, I would hope for a delayed compliance date for those changes,” Reish said. “On the other hand, if the changes are minor and are consistent with the DOL’s Reg BI, it may be less of a problem, particularly for broker-dealers.”

The “bigger impact,” Reish argued, “will be if fixed indexed annuities and variable annuities are moved from PTE 84-24 to 2020-02. In that case, the DOL should provide a delayed compliance date for the insurance industry.”

Looking ahead, Reish anticipates proposed guidance setting out the DOL’s planned changes to be issued this year, but not finalized “until early next year.”

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