Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
United States Department of Labor (“DOL”) Secretary Alexander Acosta recently announced that the final DOL fiduciary regulations (the “Fiduciary Rule”) will go into effect on June 9, 2017. In an op-ed in the Wall Street Journal, Secretary Acosta noted that the current version of the Fiduciary Rule “may not align with President Trump’s deregulatory goals,” but he stated there was “no principled legal basis to change the June 9 date.” In addition to the announcement in the op-ed, the DOL issued two items of guidance regarding the implementation of the Fiduciary Rule: FAB 2017-02 and FAQs on the Fiduciary Rule.
FAB 2017-02 sets forth a temporary enforcement policy with respect to the Fiduciary Rule. Under that enforcement policy, during a phased implementation period, which ends on January 1, 2018, the DOL “will not pursue claims against fiduciaries who are working diligently and in good faith to comply” with the Fiduciary Rule.
The FAQs address several items primarily relating to the applicability of the prohibited transaction exemptions prior to the January 1, 2018 full implementation date. Regarding the “best interest contract” (“BIC”) exemption in particular, the DOL stated that the only requirement for the BIC exemption is to adhere to the “impartial conduct standards,” which the DOL described as follows:
- Give advice in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty. Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption. Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;
- Charge no more than reasonable compensation; and
- Make no misleading statements about investment transactions, compensation, and conflicts of interest.
As Secretary Acosta pointed out in his op-ed, the current Fiduciary Rule is not in line with the current administration’s goals. The op-ed and the other items of DOL guidance indicate that the Fiduciary Rule continues to be under review and additional changes could be made prior to the January 1, 2018 full implementation date.
It bears noting that irrespective of the ultimate fate of the Fiduciary Rule, plan sponsors will remain responsible to carry out the fiduciary obligations that ERISA imposes upon them. To help ensure that plan fiduciaries have procedures in place for plan governance and for monitoring all service providers, Littler offers a Fiduciary Toolkit that can assist plan sponsors with ensuring that they have adopted best practices for fiduciary governance of their plans.