In a move that should come as a surprise to no one, the DOL delayed the effective date of the fiduciary rule. Now that there’s some definitive information on the rule’s timetable, Finance can move forward with its strategy.
The DOL says the implementation deadline of the rule will be delayed until at least June 9. It was initially slated to take effect, in part, beginning on April 10.
The agency’s delay comes on the heels of a recent announcement that it wanted to push back the effective date back another 60 days and make the effective date June 9.
The DOL said it plans to use the extra time to collect a variety of info – including public comments – on the possible effects of the rule.
The harm or hinder question
All of the DOL’s actions followed a Trump memorandum asking the agency to examine the rule to find out whether it will hinder access to retirement and financial advice.
Specifically, the Trump memorandum instructed the feds to conduct the analysis to determine if the new rule has:
“harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structure, retirement savings information, or related financial advice.”
If that analysis does in fact uncover harm to retirement offerings and advice, the order gives the DOL the option of “rescinding or revising” the version of the rule the financial services industry and employers have been prepping for.
In addition, until nominee R. Alexander Acosta is confirmed, the DOL is operating without a Secretary.
Greater protections, best interest
In a nutshell, the current version of the rule aims to grant plan participants greater protections by requiring brokers and advisers to act in their clients’ best interests when doling out investment advice.
For your employees, this is a good thing as there will be greater incentive for advisers and brokers to offer the best possible investment options for plan participants — instead of directing participants to investments they’re getting paid to recommend.
Reason: Under the final rule, anyone providing investment advice – including brokers and advisers – will be designated as a fiduciary and must disclose any potential conflicts of interest to plan participants.
Should advisers/brokers opt not to disclose such conflicts, they could be subject to ERISA non-compliance penalties as well as employee lawsuits. But brokers and advisers aren’t the only ones who are open to penalties and legal action. The employers that hired the advisers in the first place can also be liable under the law.
