Compliance

DOL Publishes Field Assistance Bulletin Regarding Fiduciary Rule Delay

The Department of Labor is seeking to offer assurance to advisers that it does not intend to enforce the fiduciary rule slated for implementation April 10, even if it fails to formally overturn the rulemaking by then. 

By John Manganaro editors@assetinternational.com | March 14, 2017

Retirement plan advisers and services providers will likely breathe a little easier after reading a new field assistance bulletin published by the Department of Labor (DOL).

The document outlines a “temporary enforcement policy” related to the DOL’s recent proposal to extend for 60 days the applicability date of the final rule defining who is a fiduciary under the Employee Retirement Income Security Act (ERISA).

Erin Sweeney, member at Miller and Chevalier, tells PLANADVISER she views the bulletin as “an effort to quell potential confusion regarding the potential delayed applicability of the fiduciary rule.”

“The Department of Labor has made clear that if a delay is implemented after the original applicability date of April 10, 2017, the DOL will not conduct enforcement efforts between April 10, 2017 and the date the delay is implemented,” Sweeney explains. “The DOL has also clarified that if a delay is not implemented, that advisers and financial institutions will have a ‘reasonable period’ following the determination that a delay will not be implemented to comply with the rule.”

 A team of ERISA attorneys from Drinker Biddle and Reath offer their take here, reaching similar conclusions about what the new bulletin means for advisers and providers.

“The FAB recognizes the industry’s concerns about having to comply with the rule during a temporary gap period,” they write, “as well as the possibility that it could find out only immediately prior to April 10 that no delay would occur. The FAB assures advisers and financial institutions that they will not face possible DOL enforcement merely because they elect to wait and see what happens. The FAB makes clear that the DOL still intends to issue a final delay regulation before April 10, but it provides at least some breathing room for the industry in light of the uncertainty.”

Specifically, according to the Drinker Biddle attorneys, the bulletin “provides that the DOL will not take enforcement action for non-compliance with the fiduciary rule, including its related exemptions, in two cases.” The first of these cases would be “if the DOL decides to delay the fiduciary rule but the delaying regulation is not finalized until after April 10.” In this case, the rulemaking “would trigger fiduciary status and prohibited transactions for many advisers and financial institutions that waited for the DOL to complete the regulatory process. During the gap period (April 10 until the delay is finalized), the FAB states that DOL will not take enforcement action related to the Rule.”

Second, should there ultimately be no delay, the attorneys explain advisers and financial institutions “would have a ‘reasonable period’ after that decision is announced to begin complying with the rule. Further, the FAB states that the ‘Transition Period’ disclosures required under the Best Interest Contract Exemption (BICE) and the DOL’s exemption for principal transactions could be provided during the 30-day ‘cure period’ that these two exemptions recognize where disclosures are inadvertently omitted. In fact, it appears that the DOL is hoping that advisers and financial institutions relying on BICE (or the principal transaction exemption) will hold off on providing retirement investors with Transition Period disclosures until after the delay (if any) is finalized.”