On August 9, 2017, the Department of Labor (DOL) and Secretary of Labor, Alexander Acosta, submitted a proposal to the Office of Management and Budget (OMB) to further delay the applicability date of certain parts of the “Fiduciary” rule until July 1, 2019. The Fiduciary rule was initially scheduled to become effective on April 10, 2017; however in April 2017, the DOL published a final rule delaying the applicability date of the Fiduciary rule and certain related “Prohibited Transaction Exemption” rules until June 9, 2017. Accordingly, much of the Fiduciary rule, including the “Best Interest Contract Exemption” (BICE) and the “Principal Transactions Exemption”, took effect on June 9, 2017. However, during a transition period from June 9, 2017 until January 1, 2018, fiduciaries relying on the BICE and Principal Transactions Exemption rules for covered transactions must only adhere to the ‘‘best interest’’ standard and the other “Impartial Conduct Standards”.
The DOL publically announced its proposal to further delay the applicability date of certain parts of the Fiduciary rule by 18 months in a notice of administrative action filed in a district court case in Minnesota, Thrivent Financial Lutherans v. Acosta, 16-cv-3289-SRN-DTS (D. Minn.). The proposal filed with the OMB is not yet publically available. The DOL’s filing in the district court case indicates that the DOL has proposed to delay the application of BICE, the Principal Transactions Exemption, and Prohibited Transaction Exemption 84-24 for certain transactions involving insurance agents and brokers, pension consultants, insurance companies.
Once the DOL’s proposal to delay the applicability date is approved by OMB, the proposed delay will likely be subject to public comment before the DOL formally delays the implementation of the Fiduciary rule and certain related exemptions.
At this time, the future of the DOL’s Fiduciary rule remains unclear. However, for now, plan sponsors and named fiduciaries should continue to prepare for full implementation and enforcement of the DOL’s Fiduciary rule. Many facets of the Fiduciary rule became effective on June 9, 2017. Until the DOL issues further guidance, plan sponsors and named fiduciaries should expect that the remaining portions of the Fiduciary rule, including BICE and the Principal Transactions Exemption will become applicable on January 1, 2018.