Fiduciary Rule Proposal: Comment Period Is Firm

Stakeholders in the retirement, insurance and investment industries had called on the Department of Labor to double the comment period for a new fiduciary rule proposal from 60 days to 120 days.
Reported by Alex Ortolani

The Employee Benefits Security Administration has denied requests for an extension of the comment period on the fiduciary adviser rule proposal, declining to heed the advice of, among others, 18 organizations that sent a letter to the regulator. The DOL’s proposed amendments to the Employee Retirement Income Security Act
were announced October 31.

Assistant Secretary of Labor Lisa Gomez, in a response to the Securities Industry and Financial Markets Association, wrote that EBSA had engaged informally with many stakeholders prior to the proposal’s publication. Gomez, who heads EBSA, added that the agency has been working on regulating this space since about 2010 and was already familiar with the issue.

“At this point, EBSA does not intend to extend the comment period or delay the hearing,” Gomez wrote in the letter. “If you or any of your members would like to discuss any issues in the proposed rulemaking package with EBSA, we would be happy to set up a meeting, which would become part of the public record for the proposal.

The comment period runs from November 3 through January 2, 2024, leaving 39 business days to
file comments.

The DOL had also announced a public hearing to discuss the proposal approximately 45 days after its publication.

Previous iterations of the proposal, in 2010 and 2016, each had a 90-day comment period with extensions. The new proposal reframes “regular basis” and “relationship of trust and confidence” as regular one-time recommendations made to investors in general, that is, in the ordinary course of the firm’s business. 

The regulators are looking to swap the current five-part test with a three-part test to define whether an adviser is acting as a fiduciary. A recommendation would trigger fiduciary status if the person: has discretionary authority over ­retirement plan assets; identifies himself as a fiduciary; or renders paid advice on a regular basis to retirement investors that could inform their decisions concerning retirement assets.

The proposal would also update Prohibited Transaction Exemption 84-24, which lets insurance agents receive a commission for the sale of annuities to retirement investors. Further, the proposal would bring requirements from PTE 2020-02 into 84-24, so insurance agents have the same standards of care when making annuity sales that fiduciary advisers do.