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Update on DOL Fiduciary Rule Applicability Delay and Litigation

On February 9, 2017 the Office of Management and Budget (OMB) received a proposed rule to delay the applicability date of the fiduciary rule the Department of Labor (DOL) finalized last year. Currently, the fiduciary rule is scheduled to become applicable on April 10, 2017, and as discussed in a previous post and an article, the rule was the subject of a presidential memorandum issued February 3 that directed the DOL to reexamine the rule and consider revising or rescinding it.

While there are many reports and speculation among the press regarding the length of the delay, we won’t know any definitive details until the proposal is submitted for publication in the Federal Register. Here is what we expect will happen next:

  • Once the OMB completes its review and (presumably) approves the proposal, the DOL will publish the proposed rule in the Federal Register.

  • A comment period will begin on the date the proposal is published.

  • Once the comment period closes, the DOL will review the comments and prepare a final rule, which it will submit to OMB.

  • Assuming the OMB approves the final rule following its review, the DOL will publish the final rule in the Federal Register, formally adopting the new applicability date.

We expect that the comment period will be short, and encourage interested parties to consider commenting on aspects of the rule and its proposed delay.

On February 8, just before the proposed delay went to the OMB, a federal district court in the Northern District of Texas rejected challenges to the DOL fiduciary rule. Ruling in favor of the DOL on all counts, the court rejected the plaintiffs’ arguments that (i) the DOL exceeded its statutory authority under ERISA and/or its exemptive authority in issuing the fiduciary rule and related exemptions, (ii) the new exemptions impermissibly created a private right of action, and (iii) the rulemaking process violated the Administrative Procedure Act.

The same day the ruling was issued, the DOL had requested that the court hold off on issuing a ruling until at least March 10, so that the DOL could conduct a further review of the rule.

Copyright © 2017 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.