On April 7, the Federal Register published the latest twist in the long and winding journey to applicability of the Department of Labor’s (DOL’s) regulation revising the definition of “fiduciary” in the context of providing investment advice. The regulation was slated to become applicable on April 10, 2017. With the election of US President Donald Trump in November, however, many in the retirement plan industry expected a delay in implementation or some other action to be taken to stop the rule from becoming applicable. This delay has finally come—on the very last business day before the applicability date—but it may not provide much in the way of relief to financial services providers seeking to comply with the new requirements.
The final rule published in the Federal Register delays the applicability date of the rule for 60 days, pushing it back to June 9, 2017. The prohibited transaction exemptions that were issued along with the rule are also delayed until June 9, 2017, with certain conditions of the prohibited transaction exemptions being delayed until January 1, 2018. We discuss the implications of this delay in detail in our LawFlash published today.
The DOL reported that it received 193,000 comments and petition signatures on the issue of the delay alone (we note that while the DOL certainly received many comments, the overwhelming majority of what the DOL has counted as comments are signatures on various types of petitions).
When the DOL first proposed the 60-day delay on March 2, it also solicited comments on the rule more generally, including comments on the questions posed in the president’s memorandum directing the DOL to further review the rule. The comment period for those comments runs until April 17, 2017. The DOL has said that it will use the period between the receipt of those comments and January 1, 2018 to consider whether changes to the rule are warranted.
To quote Yogi Berra (which feels appropriate at the start of this new baseball season), “It ain’t over ’til it’s over.” Some read the DOL’s analysis to suggest that no further delay is expected, given that the DOL focused on the costs of the delay in the form of investment returns foregone by retirement investors as a result of conflicted advice. The DOL concluded that the cost of such foregone returns for 60 days was warranted by the compliance-related cost savings that the DOL predicted the 60-day delay would provide, but that foregone returns over a longer delay period would not be warranted. On the other hand, one can reasonably ask why the DOL would provide for the additional comment period if further delay or revision were not a possibility.