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DOL’s New Fiduciary Rule Effective On June 9, 2017, but Not Enforced Until January 1, 2018

On May 22, 2017, Labor Secretary Acosta confirmed that the new fiduciary rule, the Best Interest Contract Exemption (BICE), and other related exemptions will take effect on June 9, 2017. In conjunction with this, the Department of Labor (DOL) has issued Field Assistance Bulletin No. 2017-02 and new FAQs that provide guidance on the new transition period, which begins on June 9, 2017, and extends through January 1, 2018. 

An institution’s status as a fiduciary under the new rule will begin on June 9, 2017, if it provides investment advice (including rollover advice) for direct or indirect fees or other compensation. Anyone wanting to take advantage of the BICE, the Class Exemption for Principal Transactions, or PTE 84-24 to receive variable compensation must adhere to the applicable “impartial conduct standards” throughout the new transition period without having to comply with the other related rules, such as written disclosures, contracts, etc. which take effect on January 1, 2018. The DOL expects affected parties to exercise their discretion in implementing reasonable policies and procedures to ensure compliance with these impartial conduct standards. During the new transition period, the DOL and IRS will not take action against fiduciaries that are working diligently in good faith to comply with the new guidance. These non-enforcement policies do not prohibit private lawsuits brought by, or on behalf of, plans or participants against institutions that violate the new fiduciary rule.

Although the FAQs make it clear the DOL is still studying the new fiduciary rule and that changes to it may be possible, plan sponsors and administrators should coordinate with their recordkeepers, financial institutions, and other parties that may come within the scope of the new fiduciary rule to check on the compliance status or to determine if other strategies (e.g., reduced services or increased costs) will be implemented to deal with the new fiduciary rule.

©2022 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume VII, Number 144

About this Author

Jorge Leon, Michael Best Law Firm, Labor and Employee Benefits Attorney
Partner, Diversity and Inclusion Committee Chair

Plan sponsors, administrators, fiduciaries, and third-party recordkeepers turn to Jorge for strategic counsel on designing, establishing, and maintaining retirement plans. Clients laud his responsiveness and meticulous approach to matters ranging from plan establishment and design to government investigations and inquiries, ongoing compliance and qualification, ERISA litigation, and mergers and acquisitions.

Before joining Michael Best, Jorge practiced for 15 years at a premiere Chicago-based AmLaw 100 firm, where he was the lead partner...

Jason Faust, Michael Best Law Firm, Employee Benefits Attorney

Clients rely on Jason for strategic counsel regarding a broad range of employee benefits and executive compensation matters, including:

  • Qualified defined benefit and defined contribution retirement plans, including pension and 401(k) plans

  • Health and welfare plans, including Patient Protection and Affordable Care Act compliance

  • Nonqualified deferred compensation plans

  • Multiemployer pension and health and welfare plans

Kirk Pelikan, Michael Best Law Firm, Labor and Employment Attorney

Kirk’s practice focuses on legal issues related to all aspects of the employment cycle, from hiring through termination and severance. Substantially experienced in both benefits and employment law, Kirk is well positioned to help clients respond to the opportunities, vulnerabilities and benefit ramifications of particular employment decisions.

Kirk’s focus includes:

  • Developing and maintaining effective compliance strategies related to defined benefit plans, defined contribution plans, executive...