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DOL to Propose Extension of Fiduciary Rule Transition Period

The proposal is expected to delay additional conditions of exemptions from January 1, 2018 to July 1, 2019, but the ultimate length of delay will not be clear until the DOL publishes a final rule.

The US Department of Labor (DOL) has submitted to the Office of Management and Budget (OMB) proposed amendments to extend the transition period of the Best Interest Contract Exemption, Principal Transactions Exemption, and PTE 84-24 (regarding insurance contracts and annuities).

According to a notice filed in one of the pending lawsuits challenging the DOL fiduciary rule and exemptions, the proposed amendments seek to defer the applicability of the full conditions of such exemptions for 18 months until July 1, 2019, but this date is subject to OMB clearance and may be changed before the proposal is officially published in the Federal Register. Moreover, the proposal likely will be subject to a notice and comment period so that interested parties may comment on the merits and length of the delay, as well as to further OMB review of any DOL proposed final rule. Thus, the ultimate length of the delay (if any) will not be clear until the DOL publishes a final rule.

Implications of a Delay

A delay in the applicability of the exemption conditions would provide additional time for the DOL to continue to review the fiduciary rule and exemptions as directed by the president—including consideration of the comments received in connection with other questions in the request for information (RFI)—and make any changes or revisions it deems appropriate.

Moreover, a delay would extend the transition period during which the exemptions require only that fiduciaries provide investment advice that satisfies the impartial conduct standards (i.e., duty of prudence, duty of loyalty, reasonable compensation, and no misleading statements). We note that the DOL has issued two sets of FAQs on the requirements during the transition period. As discussed in our prior coverage of these FAQs, this guidance generally indicates that fiduciaries have flexibility as to how they may demonstrate compliance with the impartial conduct standards, particularly with respect to compensation structures.

What Firms Should Do Now

We strongly encourage interested parties to comment on the proposed amendments to extend the applicability date once they are published. We note that, although the formal comment period for the other sections of the RFI closed on August 7, 2017, the DOL has acknowledged that it will endeavor to consider comments submitted after August 7.

While this latest development is a good sign that there ultimately could be a delay of the additional exemption conditions until July 1, 2019, there is no certainty until a final rule is published in the Federal Register. Until then, the exemptions will continue to reflect the January 1, 2018 applicability date. As such, firms will want to evaluate how best to address this uncertainty in determining their compliance plans.

Copyright © 2018 by Morgan, Lewis & Bockius LLP. All Rights Reserved.


About this Author

Daniel R. Kleinman Morgan Lewis Washington DC fiduciary law, Employee Retirement Income Security Act, ERISA attorney

Daniel R. Kleinman is a partner in Morgan Lewis's Investment Management and Securities Industry Practice and a member of the ERISA Fiduciary Services Group. Mr. Kleinman's practice focuses on the fiduciary responsibilities provisions (Title I) of the Employee Retirement Income Security Act and the related tax, corporate and securities laws in connection with the structuring and marketing of investment products (including private equity and hedge funds) and financial services to employee benefit plans. He also handles issues with respect to the regulation of broker-dealers and investment...

Michael B. Richman, Morgan Lewis, Washiington DC, Employee Retirement Income Security Act lawyer,  ERISA Attorney

Michael B. Richman is of  Morgan Lewis's Employee Benefits and Executive Compensation Practice. In addition to employee benefits, Mr. Richman's practice includes the investment management and securities areas. His principal focus is on matters under the ERISA fiduciary responsibility rules. These have included fiduciary governance of ERISA plans, prohibited transaction issues in proposed transactions and transactions under government investigation, and preparing requests to the U.S. Department of Labor for prohibited transaction exemptions and advisory opinions. Mr. Richman has also worked on ERISA compliance for investment funds and investment managers and plan administrative matters.

Michael B. Richman counsels clients on the fiduciary responsibility rules under the Employee Retirement Income Security Act (ERISA), including the ERISA prohibited transaction rules. He advises plan sponsors on investment matters for defined benefit and defined contribution plans. He also counsels banks, investment adviser firms, and broker-dealer firms on ERISA compliance for ERISA plan separately-managed accounts, collective investment funds, private funds, and other arrangements. Additionally, he provides guidance to IRA custodians on permissible IRA investments and investment restrictions.

Lindsay B. Jackson, ERISA Attorney, Morgan Lewis, Law Firm

Lindsay B. Jackson is an associate in Morgan Lewis's Investment Management Practice and a member of the ERISA Fiduciary Services Group.  Ms. Jackson focuses her practice on matters under the ERISA fiduciary responsibility rules, and the related tax, corporate and securities laws in connection with employee benefit plan investments and other services provided to employee benefit plans. She also handles issues related to prohibited transactions and exemptions and the Department of Labor's fee disclosure requirements. Ms. Jackson has experience counseling clients on issues related to employee...

William Marx, Morgan Lewis Law Firm, Philadelphia, Labor and Employment Attorney

William J. Marx helps employee benefit plan sponsors and financial service providers with a range of matters related to employee benefits. His focus includes advising clients on qualified and nonqualified retirement plan issues, and the fiduciary and prohibited transaction rules under ERISA. William has several years of business experience in the retirement plan industry, including consulting plan sponsors on plan design, employee education, and investments among other business decisions.


Katrina L. Berishaj advises clients on the design, governance, operation, and compliance of qualified and nonqualified retirement plans, welfare benefit plans, and executive and equity compensation arrangements. In addition, Katrina counsels clients on the fiduciary and prohibited transaction rules of ERISA. She is admitted to practice in Maryland only, and her practice is supervised by DC Bar members.