Yesterday, the Department of Labor (DOL) announced in a court filing that it will propose (i) extending the transition period for fiduciaries impacted by the DOL’s new “fiduciary rule” regulations that went into effect on June 10, 2017, and (ii) delaying the applicability dates for certain prohibited transaction exemptions through at least July 1, 2019. The fiduciary rule regulations extend ERISA’s fiduciary standards to persons who provide investment advice to retirement plan participants, IRA owners and HSA owners. For more information the regulations, please see out prior HRBenefitsAuthority dated April 14, 2016.
Effect of Extension. The DOL’s potential extension of the transition period appears to mean:
- Fiduciaries impacted by the regulations would temporarily benefit from a “good faith” compliance standard through at least July 1, 2019, instead of January 1, 2018.
- During the extended transition period from June 10, 2017, through July 1, 2019, fiduciaries would only need to comply with the “impartial conduct standards”, which require fiduciaries to:
- Give retirement investors advice that is in the investor’s “best interest”. This means that fiduciaries (i) must give advice based on the investor’s interests instead of competing financial interests of the advisor or his/her firm, and (ii) the advice must satisfy the professional standard of care specified in the prohibited transaction exemption;
- Charge no more than a reasonable amount; and
- Avoid making misleading statements regarding (i) investment transactions, (ii) the fiduciary’s compensation, and (iii) the fiduciary’s conflicts of interest.
- The DOL has previously indicated that during the transition period, the DOL intends to focus on compliance assistance rather than penalty enforcement, and the DOL will not bring enforcement proceedings against fiduciaries who are making diligent and good faith efforts to comply with the new regulations.
- During the extended transition period from June 10, 2017, through July 1, 2019, fiduciaries would only need to comply with the “impartial conduct standards”, which require fiduciaries to:
- The written disclosure requirements for certain prohibited transaction exemptions would be scheduled to take effect on July 1, 2019 instead of January 1, 2018.
Even though the regulations took effect on June 10, 2017, the DOL has requested information from the public as part of its re-examination of the fiduciary rule in light of President Trumps February 3, 2017 directive. During the transition period, the DOL may consider further delays and/or revisions to the regulations based on the responses it receives. For more information on the President’s directive, please see our prior HRBenefitsAuthority dated February 6, 2017.
Contact Information. For more information, please contact Don Mazursky (404.888.8840), David Putnal (404.888.8836), Toby Walls (404.888.8870), Teri King (404.888.8847), or Alex Smith (404.888.8839).