DOL Issues RFI About Fiduciary Rule

The Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL) is publishing a request for information (RFI) in connection with its examination of the final fiduciary rule under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC).

The agency’s examination also includes the new and amended administrative class exemptions from the prohibited transaction provisions of ERISA and the IRC that were published in conjunction with the rule. The request for information specifically seeks public input that could form the basis of new exemptions or changes/revisions to the rule and prohibited transaction exemptions (PTEs), as well as input regarding the advisability of extending the January 1, 2018, applicability date of certain provisions in the best interest contract exemption (BICE), the class exemption for principal transactions in certain assets between investment advice fiduciaries and employee benefit plans and individual retirement accounts (IRAs), and PTE 84-24.

The fiduciary rule and PTEs had an original applicability date of this April 10.  However, a February memorandum from President Donald Trump directed the agency to analyze the rule’s likely impact on the access to retirement information and financial advice. In response, EBSA delayed the applicability date of the final rule to June 9 and asked for additional input.

At the PLANSPONSOR National Conference (PSNC), earlier this month, Timothy Hauser, deputy assistant secretary for program operations of EBSA, noted that while the BICE and PTEs went into effect June 9, other provisions of the rule were delayed until January 2018 in order for the agency to complete its analysis. He indicated then that the agency would soon be releasing an RFI to further its analysis.

In the RFI, EBSA noted that previous public input about the fiduciary rule and PTEs has suggested that it may be possible in some instances to build upon recent innovations in the financial services industry to create new and more streamlined exemptions and compliance mechanisms. For example, one recent innovation is the possible development of mutual fund “clean shares.” Commenters noted, however, that fund companies will need more time to develop clean shares than contemplated, to meet the current January 1, 2018, deadlines.

Commenters also described innovations in other parts of the retirement investment industry, such as insurance companies’ potential development of fee-based annuities in response to the fiduciary rule. Firms are also developing new technology and advisory and data services to help financial Institutions satisfy the supervisory requirements of the PTEs. “The department welcomes information on these developments and their relevance to the rule, the PTEs’ terms and compliance timelines,” EBSA said in its RFI.

EBSA said it is particularly interested in public input about whether it would be appropriate to adopt an additional, more streamlined exemption or other rule change for advisers committed to taking new approaches such as the ones mentioned above based on the potential for reducing conflicts of interest and increasing transparency. “If commenters believe more time would be necessary to build the necessary distribution and compliance structures for such innovations, the department is interested in information related to the amount of time expected to be required,” the agency said.

There are 18 questions in the RFI. Comments about the first question, asking about the delay of the BICE and PTEs until January 2018, are due 15 days after publication of the RFI in the Federal Register. Comments about the other 17 questions are due 30 days after publication. Ways to submit comments can be found in the text of the RFI.