Compliance March 29, 2017

Fiduciary Rule Delay Under Final Review

Experts warn that plan sponsors may face their own set of challenges if and when the DOL fiduciary rule is overturned by the new administration. 

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Reports have emerged that the Trump White House has submitted the final version of a rule to delay the implementation of the Department of Labor (DOL) fiduciary rule adopted by the previous president but left to the current leadership to implement.

The Office of Management and Budget (OMB) is among the many federal agencies that do not actively broadcast their activities; the news comes from an updated regulation tracking page on the OMB website. That page shows OMB, the entity tasked with analyzing the budgetary and economic impacts of new regulations and laws, received the text of the final version of the delay order on March 28.

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A variety of sources have suggested the 15-day comment period allowed on the proposed version of the final fiduciary rule delay measure was shorter than either precedence or prudence would seem to dictate—yet the administration argued its hand was forced by the rapidly approaching deadlines assigned by the outgoing Obama administration. Indeed, it would not be easy or enjoyable for advisory firms and their plan sponsor clients to come into compliance with the stricter DOL standards, only to see them rolled back weeks or months later.

Assuming the final version will closely resemble what was proposed and commented on, it is important to note this new delay rulemaking does nothing to actually declaw the fiduciary rule and its related prohibited transaction exemptions. It is simply a measure to give the DOL more time to decide how to proceed.

It will certainly help bring clarity to the entire effort once the president’s Labor Secretary nominee is (finally) installed. Readers will likely recall the botched effort to install Andrew Puzder to the position. Now the expectation is that the new nominee, former member of the National Labor Relations Board R. Alexander Acosta, could be confirmed as soon as this week. Acosta and his deputies will then have to decide how to proceed in terms of actually removing the fiduciary rule.

Products March 28, 2017

Hanson Bridgett Launches Determination Letter Replacement Program

The firm can issue an opinion letter to the plan sponsor or administrator that the plan, as timely amended to comply with IRS changes, continues to remain tax-qualified in form for the period since the plan's last favorable IRS determination letter or private opinion letter.
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The Internal Revenue Service (IRS) has limited its determination letter program, which many sponsors and administrators of qualified plans have relied on to document their qualified-tax status. In response, firms are launching services to fill the void.

Hanson Bridgett is launching Determination Letter Replacement Program (DLRP). It is designed for private-sector, multiemployer, and governmental individually designed plans that have participated in the IRS periodic determination letter program and have a current favorable IRS determination letter.

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Under request and for a standard annual fee, DLRP will allow for the review of plan documents against the IRS annual Required Amendments List of changes in qualification requirements. It would also provide a list of plan amendments needed to comply with those changes and the applicable amendment deadlines. Moreover, the firm can issue an opinion letter to the plan sponsor or administrator that the plan, as timely amended to comply with those changes, continues to remain tax-qualified in form for the period since the plan’s last favorable IRS determination letter or private opinion letter. The opinion will be conditioned on the accuracy of the plan sponsor’s representations, documents and other information provided, and will not include operational compliance.

In order to participate in DLRP, the plan must meet the following requirements.

  • The plan must be an individually designed plan. Plans using IRS pre-approved master and prototype and volume submitter plans, except those that cannot rely on the pre approved plan’s IRS advisory or opinion letter due to material modification, may not participate.
  • The plan must have a current favorable IRS determination letter or private opinion letter.
  • The plan sponsor or plan administrator must contact Hanson Bridgett by September 30 to request to participate in the DLRP, and pay an annual fee that will be invoiced. Hanson Bridgett will not automatically review plans for current clients; plan sponsors or plan administrators need to affirmatively notify Hanson Bridgett of their desire to participate in this new program.
  • The plan sponsor or plan administrator must timely provide all relevant plan documents and other information needed to complete the review.

Although the standard DLRP fee will cover only the plans and services described above, the program may be customized to fit unique circumstances. For example, the firm will, upon request and for an additional fee, draft any required amendments, review and provide an opinion letter for a plan that does not have a current determination letter, or assist in performing an operational self audit. Hanson Bridgett will prepare required amendments for a flat fee, to be determined based on the scope and complexity of the amendments.

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