InsuranceNewsNet Summarized Takeaways From a Faegre Drinker Webinar on DOL Guidance and SECURE Act 2.0

In “Get Ready For A Lot More DOL Drama, Faegre Drinker Analysts Say” InsuranceNewsNet shared insights from Faegre Drinker’s 36th session of “Inside the Beltway,” including comments from benefits and executive compensation partner Brad Campbell on Department of Labor (DOL) guidance and the Securing A Strong Retirement Act, or SECURE 2.0.

Campbell said the “expansion of the definition of fiduciary is being accomplished by guidance by the DOL saying, ‘We’re not changing the words of the old rule. We’ve just decided they mean something different than they used to.’” He explained, “The effect of that, as of Feb. 16, is that if you’re recommending a rollover, you’re now, in most cases, going to be providing ERISA fiduciary advice, whereas, in the past, the DOL’s official position was most rollovers were not.”

Campbell also noted, “Regardless of the license you have, or what standard you advise under in your normal career as a financial professional, ERISA would now apply to that. And the effects of that are pretty far-reaching.”

Moreover, the “DOL announced along with the guidance that they were going to do some new things long term,” Campbell said. “One, they’re going to take another look at the underlying 1975 fiduciary regulation, and they may well change that.”

Campbell added that the “DOL may go beyond its interpretation of the original regulation, which they’re currently using, to a new regulation ala 2016 when the Obama administration fundamentally changed the rule itself, which was later vacated by the courts.”

Another DOL ambition in the long term is to review all the exemptions, including PTE 84-24, with an eye toward revoking or revising them, Campbell reported. “For a variety of financial professionals who are using exemptions other than the new 2020-02, those may or may not be available,” he said. “And there’s probably going to be a lot of discussion and debate about how they should be modified and regulatory activity to that effect down the road.”

“What we have overall is a situation where starting Feb. 16, much more of what you were recommending, especially in rollovers, was now subject to ERISA, and you have until Dec. 20 to put in place compliance with an exemption,” Campbell said. “And the exemption you’re complying with on Dec. 20 may fundamentally change after Dec. 20 through a regulatory process.”

Campbell further explained how he’s “somewhat pessimistic about the future and things under the new fiduciary issues initiatives undertaken by DOL because it’s creating a short-term compliance issue.” He continued, “It’s then about to replace it immediately after that with a long-term compliance issue, which means a lot of change and a lot of paying attention to fine details for all of us for the next 18 months.”

However, Campbell said, “I think most folks looking at the bill are pretty optimistic that some form of the SECURE Act, whether it’s called that or something else, will pass this year.”

In conclusion, Campbell noted, “What’s not clear is whether it all goes as a standalone, how long that takes or whether it’s incorporated in other bills.” He said, “There’s a much bigger set of tax issues under consideration from the Biden administration.”