The Department of Labor (DOL) has issued final regulations extending the transition period for key provisions of the fiduciary rule to July 1, 2019. The delay affects the best interest contract (BIC) exemption, principal transactions exemption and amendments to the prohibited transaction exemption 84-24, as well as the DOL’s non-enforcement policy.
The transition period and non-enforcement policy were announced earlier this year. Absent this extension, both would have expired on January 1, 2018. Now, compliance with many of the reporting and disclosure requirements for the exemptions is not required until July 1, 2019, as long as plan fiduciaries work diligently and in good faith to comply with the fiduciary rule and the exemptions.
Retirement plan fiduciaries should monitor vendors that are now acknowledging fiduciary status in participant-level investment advice to ensure the advice is in participants’ best interest. They should also monitor vendors that opted not to provide participant-level investment advice to ensure their communications with participants do not constitute unintended fiduciary investment advice under the new definition.
Given that the broader definition of fiduciary investment advice took effect on June 9, participants may now initiate lawsuits for investment advice they believe was not in their best interest, which could include advice about rollovers to retirement plan participants. The delays only protect investment advice fiduciaries from DOL enforcement.
The DOL is continuing to evaluate the fiduciary rule and related exemptions, so additional changes are possible. Moreover, the DOL plans to coordinate with other regulatory entities, including the Securities and Exchange Commission, Financial Industry Regulatory Authority and National Association of Insurance Commissioners, to develop a universal fiduciary standard for all investment advice providers. If that effort succeeds, the DOL could decide to revoke its fiduciary rule altogether.