The U.S. Department of Labor (DOL) has proposed a rule that would delay the applicability date of the DOL Fiduciary Rule 60 days.
The proposal, which would delay the applicability date until June 9, 2017, is open for public comment until March 17, 2017. In addition to the proposed applicability date delay, the DOL is opening a 45-day public comment period on the underlying rule itself, which would make financial advisors fiduciaries under the Employee Retirement Income Security Act (ERISA) when providing advice on retirement accounts.
The proposals are the beginning of the DOL’s implementation of President Donald Trump’s Presidential Memorandum on Fiduciary Duty Rule, issued Feb. 3, 2017. Trump’s memo directed the DOL to “prepare an updated economic and legal analysis” of the rule.
The DOL’s rationale for seeking the delay is that it needs more time to complete the new analysis ordered in the presidential memorandum and that revising or rescinding the rule after it became applicable would be problematic. As the filing notes, were the DOL to rescind or revise the rule after it became applicable, “retirement investors and other stakeholders might face two major changes in the regulatory environment rather than one.”
The publication of the rule for comment is another step toward delaying the applicability date, but April 10 remains the applicability date for now. After receiving comments on the extension proposal, the DOL will review the comments and, presumably, publish a final rule. While the Administrative Procedures Act typically requires that rules be published 30 days in advance of effectiveness, the DOL filing makes clear that the applicability date delay would be effective as of the date the final rule is published in the Federal Register.
Between March 17 and April 10, the DOL needs to review the comments it receives on the proposal to delay the applicability date and to respond to them in the final rule filing, and the Office of Management and Budget (OMB) needs to review the DOL’s final rule and approve it for publication in Federal Register. Upon publication in the Federal Register, the rule will be effective.
At the risk of stating the obvious, this is a tight timeframe. The comment period ends 24 days before the April 10 applicability date. To put that in context, the proposed rule was initially sent to OMB six days after the presidential memorandum, and it was published in the Federal Register 21 days later. It took the federal government 27 days to get from the presidential memorandum to publishing the proposed rule in the Federal Register, which is already an expedited timeframe for federal rulemaking. To finalize the applicability date delay, the government will have 24 days to review the comments, incorporate the comments into the final rule filing, and publish that rule in the Federal Register.
None of this is to suggest that the DOL and OMB will not delay the effectiveness of the rule. In response to a question about whether the rule would be eliminated, Gary Cohn, the director of the National Economic Council and one of the president’s top advisors, nodded and told the Wall Street Journal that the fiduciary rule was “a bad rule for consumers.” Moreover, an earlier version of the presidential memorandum actually included a 180-day delay, according to reports. In short, the political will exists to delay the effectiveness of the fiduciary rule and eventually to revise or rescind it. But while the filing is another step closer to a delay of the applicability date, the calendar for effecting that delay remains unforgiving.