November 17, 2019

November 15, 2019

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Status of the DOL Fiduciary Rule

Last Friday, the White House issued a memorandum (the “Memorandum”) directing the Department of Labor to evaluate the fiduciary rule, and the related prohibited transaction exemptions (together, the “Fiduciary Rules”), to determine whether the guidance will adversely affect retirement investors. Contrary to popular perception, the Memorandum did not direct the Department of Labor (DOL) to delay the applicability date of the Fiduciary Rules. However, shortly after the Memorandum was signed by the president, the acting secretary of the DOL released a statement saying the DOL would be reviewing its legal options for delaying the applicability date. As a result, we expect an announcement, possibly within a matter of days, that steps are being taken to delay the April 10 applicability date.

What does this mean for retirement plan and IRA service providers, such as broker-dealers, RIAs, insurance companies and retirement plan recordkeepers?

Assuming that the applicability date is delayed, and that the delay survives potential legal challenges, the consequences will be as follows:

  • The applicability date will likely be delayed, either immediately or through multiple subsequent steps, for six months or even a year. As a result, service providers to retirement plans and IRAs will likely not need to comply with the Fiduciary Rules on April 10.

  • Instead, those service providers will be required to comply with the currently applicable fiduciary regulation and existing prohibited transaction exemptions (the “old” rules).

  • In some cases, that will result in significant relief, for example, the one-time sale of investments to IRAs (since this presumably would not be advice on a “regular basis,” a condition of “fiduciary” advice under the current regulation). In other cases, the existing rules may result in fiduciary status for advisers and service providers, for example for those who provide initial and ongoing advice about investments to retirement plans. In yet other cases, the outcome is mixed: for example, recommendations of plan distributions and rollovers, as one-time recommendations, may not be fiduciary acts (except that DOL Advisory Opinion 2005-23A and FINRA Regulatory Notice 13-45 will continue to apply).

  • The DOL has the option of ultimately implementing the Fiduciary Rules as drafted, with modifications, or the DOL could withdraw the Rules. The outcome is uncertain.

  • There are several bills being drafted in Congress that would create an alternative definition of fiduciary advice and, in some cases, establish a fiduciary standard of care for advice to IRAs and plans. As with the Fiduciary Rules, the outcome of those proposals, as well as their requirements, is uncertain.

Unfortunately, part of the message in this Alert is that we will be in a period of uncertainty for a while. For the moment, though, we think that advice to plans, participants and IRAs will be subject to the “old” rules.

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About this Author

Fred Reish, Drinker Biddle Law Firm, Los Angeles, Labor and Employment Law Attorney
Partner

Fred Reish represents clients in fiduciary issues, prohibited transactions, tax-qualification and Department of Labor, Securities and Exchange Commission and FINRA examinations of retirement plans and IRA issues.

Fred works with both private and public sector entities and their plans and fiduciaries and represents plans, employers and fiduciaries before federal agencies such as the DOL and IRS. He consults with banks, trust companies, insurance companies and mutual fund management companies on 401(k) recordkeeping services, investment products and...

(310) 203-4047
Bruce Ashton, Drinker Biddle Law Firm, Los Angeles, Employment Benefits Attorney
Partner

Bruce L. Ashton has more than 35 years of experience handling employee benefits matters. His practice concentrates on representing plan service providers (including RIAs, independent record-keepers, third-party administrators, broker-dealers and insurance companies) in fulfilling their obligations under ERISA. His experience includes representing public and private sector plans and their sponsors, negotiating the resolution of plan qualification issues under IRS remedial correction programs, advising and defending fiduciaries on their obligations and liabilities, and structuring qualified plans, non-qualified deferred compensation arrangements.

Combining his employee benefits and transactional experience, Bruce is also active in the installation and funding of employee stock ownership plans (ESOPs).

310-203-4048
Bradford Campbell, Drinker Biddle Law Firm, Washington DC, Labor and Employment Attorney
Partner

Bradford P. Campbell is a nationally recognized figure in employer-sponsored retirement plans. He is the former Assistant Secretary of Labor for Employee Benefits and former head of the Employee Benefits Security Administration. As ERISA’s former “top cop” and primary federal regulator, Brad provides his clients with insight and knowledge across a broad range of ERISA-plan related issues. He provides employee benefits advice to financial service providers and plan sponsors, particularly in relation to ERISA Title I issues, including fiduciary conduct and...

202-230-5159
Joan M. Neri, Counsel, Drinker Biddle, Employee Benefits, Executive Compensation
Counsel

Her practice focuses on all aspects of employee benefits counseling.  Joan represents plan service providers (including registered investment advisers, third party administrators, and recordkeepers) in fulfilling their obligations under ERISA.  Joan also represents plan sponsor clients on the design of qualified retirement plans (including ESOPs), nonqualified executive compensation plans and welfare benefit plans, day-to-day plan administrative issues and transactional planning involving benefit plan acquisitions, plan mergers and plan terminations.  Joan has represented major publicly-...

973-549-7393
Joshua Waldbeser, Employment lawyer, Drinker Biddle
Partner

Joshua J. Waldbeser counsels plan sponsors and committees with respect to their fiduciary responsibilities under ERISA, as well as design and operational considerations for 401(k) plans, ESOPs and other defined contribution plans, cash balance and traditional defined benefit plans, and deferred compensation arrangements of all types. Josh also works extensively with insurance companies, investment advisors and funds, banks and trust companies, broker-dealers, record keepers, TPAs and other service providers with respect to ERISA, tax, securities and...

312-569-1317