In the InsuranceNewsNet article “Speculation Simmers On A DOL Fiduciary Rule Return,” benefits and executive compensation partner Fred Reish discussed how compensation structures might be impacted again depending on what the Department of Labor (DOL) does to the investment advice rules.
The publication described how the investment advice rule has two main parts: a new prohibited transaction exemption allowing advisers to provide conflicted advice for commissions and a reinstatement of the “five-part test” from 1975 to determine what constitutes investment advice. It also explained that the new rules include Prohibited Transaction Exemption 2020-02, and insurance agents were expected to continue using PTE 84-24.
“Here is where we could see the changes,” said Reish. What it means is unknown, but he offered three possibilities:
- There is speculation that it will mean that variable and fixed indexed annuities will be moved from 84-24 and placed in 2020-02.
- Another theory is that 84-24 will be amended to add several of the 2020-02 requirements, such as the Impartial Conduct Standards, which are a best interest standard, a reasonable compensation standard and a requirement to make no materially misleading statements.
- A third theory is that 84-24 will be revoked in its entirety, leaving 2020-02 as the only available exemption for insurance products of all kinds.
Reish added, “There is some discussion about 84-24 covering only commission compensation, meaning that other compensation, such as trips and awards, would not have an exemption.”