The Department of Labor (DOL) this week submitted for review by the Office of Management and Budget (OMB) the final version of a regulation to delay—likely by 18 additional months—full enforcement of the strengthened fiduciary rule.
OMB will take some time to review the regulation language, but it will very likely approve it and return the rulemaking to DOL for publication and implementation in the near-term. As readers may recall, first indication that a second delay from DOL was in the works came back in August with the preliminary publication of a proposed extension.
Until the final rule’s publication in the Federal Register, the exact details and length of the second enforcement delay will remain unclear, but industry reports are widely discussing an 18-month delay. As proposed, the extension is clearly crafted to give the Trump administration more time to consider what it will ultimately do with the signature Obama-era rulemaking. In particular, this additional year-and-a-half of transition would give the DOL and the White House a reasonable amount of time to consider the vast amount of industry commentary submitted in response to President Donald Trump’s preliminary request for information about the current and future impacts of the fiduciary rulemaking.
During a discussion with PLANADVISER on these developments, attorneys George Michael Gerstein and Larry Stadulis, respectively counsel and partner at Stradley Ronon, suggested the DOL fiduciary rule has remained a very hot topic in client conversations—recently but also since long before the Trump administration took over. They expect the OMB “will not take very much time at all” to review and approve this final regulation.
“And this is a good thing,” Gerstein says, “because this will provide some important amount of certainty to the plan adviser community and, by extension, the plan sponsor community.”
The two are eager to see the language of the second delay and are specifically interested to see what new class exemptions—either permanent or only transitory—which the DOL may create. The pair is hearing “some anxiety on this idea from different quarters.” Specifically, there is concern that if the DOL allows exemptions for investment products offering “clean shares” or “transactional shares,” this will “look a lot like the DOL picking winners and losers.”
Gerstein and Stadulis warn that “a delay in enforcement of some portions of the fiduciary rule does not mean the same thing as the rule going away entirely.”
“There are some folks out there who think that all the rules are delayed 18-months and that it’s basically the Wild West out there right now,” Gerstein notes. “That is simply not true. It is important to make the distinction that the rule itself is still in place, it’s just that there are these exempting conditions that have also been put into place that ease some of the burden of compliance as part of a transition period.”