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DOL Delays Full Enactment of Fiduciary Rule Until July 2019

Compliance
Article
12/04/2017
  • The Labor Department has delayed full implementation of the fiduciary rule by 18 months, from Jan. 1, 2018 to July 1, 2019.
  • The delay affects application of the rule's best-interest contract exemption and other prohibited transaction exemptions.
  • The rule's impartial conduct standards have been in force since June 2017, requiring financial advisors to act in clients' best interests.
  • Delay means broker-dealers, insurance companies, and registered financial advisors won't have to comply with the rule's more stringent requirements.
  • This also extends the temporary enforcement policy from FAB 2017-02, whereby the DOL will not pursue claims against fiduciaries working in good faith to comply with the rule.

18-month delay for certain aspects of fiduciary rule

The U.S Department of Labor (DOL) has delayed full implementation of the fiduciary rule by 18 months, pushing the scheduled Jan. 1, 2018, application of the rule's best-interest contract exemption, and other prohibited transaction exemptions, to July 1, 2019.

The fiduciary rule is an Obama-era regulation designed to protect investors in qualified retirement accounts — including 401(k) plans, defined benefit plans, and money purchase pension plans — from conflicted advice. The rule's official delay begins Nov. 29, 2017.

The DOL is postponing the imposition of a legally binding contract between brokers and retirement account clients, mandating that brokers act in clients' best interests. The delay also pushes back other disclosure provisions and exemptions for prohibited transactions.

However, the rule's main thrust remains in effect: Financial advisors must adhere to standards of impartial conduct, which includes acting in clients' best interests, charging no more than reasonable compensation, and avoiding misleading statements.

Impartial conduct standards in place since June 2017

This June, the DOL implemented the rule's impartial conduct standards. They require that all advice on IRAs and defined contribution plans be in investors' best interests: Financial advisors must always put clients' needs at the forefront.

In a Nov. 27, 2017 press release, the DOL said it needs time to consider public comments and reassess the rule's impact on retirement advice set out in a memorandum by President Trump on Feb. 3, 2017. That memo queried "whether possible changes and alternatives to exemptions would be appropriate in light of the current comment record and potential input from, and action by the Securities and Exchange Commission, state insurance commissioners, and other regulators."

Rule's toughest provisions not yet in force

This delay means broker-dealers, insurance companies, and registered financial advisors will not have to comply with the rule's more stringent conditions, which include enforceable contracts, disclosures, and warranties that guarantee investors are not getting conflicted advice.

Enforcement also delayed

The DOL has responsibility and authority for investigation and enforcement. However, it has stated that with the implementation of the fiduciary rule, the focus is to assist all parties working to comply with the rule and its exemptions rather than assess penalties or cite violations. The temporary enforcement policy states that “the Department will not pursue any claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation.” The DOL stated that this temporary enforcement policy, established in Field Assistance Bulletin 2017-02, is included in the delay.

mike savage headshot
Michael joined the Compliance Risk organization of Paychex in March 2015 as Manager, Retirement Services Compliance.
This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.