DOL Extends Deadline for Full Implementation of Fiduciary Rule and Issues Additional Guidance FAQs

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We have been monitoring implementation of the Department of Labor’s (“DOL”) Fiduciary Conflict of Interest Rule (“Fiduciary Rule”) and have been reporting on it in Compliance Buzzes throughout 2017. In late August, the Office of Management and Budget approved the DOL’s proposal to extend the transition period for full implementation of the new Fiduciary Rule and related prohibited transaction exemptions (“PTEs”) by 18 months—from January 1, 2018 to July 1, 2019.

It is important to note that certain provisions of the Fiduciary Rule already became effective on June 9, 2017, including with respect to non-ERISA plans, such as health savings accounts (“HSAs”). These provisions include:

  • The new definition of “fiduciary” under ERISA Section 3(21)(A)(ii) and Internal Revenue Code Section 4975(E)(3)(B);
  • The Impartial Conduct Standards for financial advisers, including HSA service providers, which require them to provide advice that is in the client’s “best interest,” charge only reasonable fees and refrain from making materially misleading statements; and
  • The applicability date of amendments to some existing DOL PTEs relating to the Fiduciary Rule.

In addition, the DOL announced that it will not pursue claims against fiduciaries based on a failure to satisfy the Principal Transactions Exemption or the Best Interest Contract (“BIC”) Exemption, or treat a fiduciary as being in violation of either of these exemptions, so long as the sole failure of the fiduciary to comply with these exemptions is a failure to comply with the Arbitration Limitation contained in these exemptions. The Arbitration Limitation would otherwise make the exemptions unavailable if a financial advisor’s contract with a retirement investor (including an HSA investor) includes a waiver or qualification of the investor’s right to bring or participate in a class action or other representative legal action.

The DOL also issued additional FAQ guidance relating to the Fiduciary Rule. The guidance addressed what disclosures are required by certain types of service providers and whether recommendations encouraging plan participation or increased contributions constitute investment advice.

Categories: Compliance | Tags: fiduciary , fiduciary rule , Department of Labor , DOL , PTE , HSA , health savings accounts , arbitration , FAQ , prohibited transaction exemptions , best interest , ERISA , Internal Revenue Code | Return