Note: RIA in a Box LLC is not a law firm and does not provide legal advice. We strongly advise that all RIA firms that provide services to individual retirement investors, pension plans, profit sharing plans, and/or retirement plans to consult with a qualified Employee Retirement Income Security Act of 1974 ("ERISA") attorney in matters relating to DOL and ERISA law. This overview is provided for general information purposes only and should not be relied upon to take any action.This post below is as April 4, 2017. As the DOL issues additional guidance, we anticipate additional updates and/or modifications will be made to this solely educational overview.
Here is a quick update on the latest fiduciary rule timeline, as of April xx, 2017, as new scheduled June 9, 2017 "applicability" date approaches:
- On April 14, 2015, the DOL released the proposed rule.
- On April 6, 2016, the DOL released the final rule.
- On June 7, 2016, the rule became “effective.”
- On April 10, 2017, the rule is currently scheduled to become “applicable.”
- On January 1, 2017, the rule is currently scheduled to become “fully applicable.”
- On February 3, 2017, President Donald J. Trump issued a memorandum asking the DOL to review the rule.
- On March 2, 2017, the DOL submitted a proposal to delay the “applicable” date 60 days to June 9, 2017.
- On March 10, 2017, the DOL issued a field assistance bulletin outlining a temporary enforcement policy for the rule.
- On March 28, 2017, the DOL sent the official request to delay the rule's applicability date to the Office of Management and Budget for approval.
- On March 28, 2017, the IRS issued guidance confirming non-applicability of excise taxes to conform with the DOL's temporary enforcement policy issued on March 10, 2017.
- On April 4, 2017, the DOL confirmed it will publish the updated rule which officially delays the rule's applicability date to June 9, 2017.
- On April 7, 2017, the official rule delay will be published in the Federal Register.
The updated rule to be published on April 7, 2017 reads as follows (bold text added for emphasis):
This document extends for 60 days the applicability date of the final regulation, published on April 8, 2016, defining who is a “fiduciary” under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986. It also extends for 60 days the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs. It requires that fiduciaries relying on these exemptions for covered transactions adhere only to the Impartial Conduct Standards (including the “best interest” standard), as conditions of the exemptions during the transition period from June 9, 2017, through January 1, 2018. Thus, the fiduciary definition in the rule (Fiduciary Rule or Rule) published on April 8, 2016, and Impartial Conduct Standards in these exemptions, are applicable on June 9, while compliance with the remaining conditions in these exemptions, such as requirements to make specific written disclosures and representations of fiduciary compliance in communications with investors, is not required until January 1, 2018. This document also delays the applicability of amendments to Prohibited Transaction Exemption 84-24 until January 1, 2018, other than the Impartial Conduct Standards, which will become applicable on June 9, 2017. Finally, this document extends for 60 days the applicability dates of amendments to other previously granted exemptions. The President, by Memorandum to the Secretary of Labor dated February 3, 2017, directed the Department of Labor to examine whether the Fiduciary Rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, and to prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Rule as part of that examination. The extensions announced in this document are necessary to enable the Department to perform this examination and to consider possible changes with respect to the Fiduciary Rule and PTEs based on new evidence or analysis developed pursuant to the examination.
It's also important to note that while officially called a 60 day delay, only the Impartial Conduct Standards will become applicable on June 9, 2017. All other requirements are delayed until January 1, 2018 (bold text added for emphasis):
The applicability date of the Impartial Conduct Standards in these exemptions is extended for the same 60 days, while compliance with other conditions for transactions covered by these exemptions, such as requirements to make specific disclosures and representations of fiduciary compliance in written communications with investors, is not required until January 1, 2018, by which time the Department intends to complete the examination and analysis directed by the Presidential Memorandum. In this way, the Fiduciary Rule (i.e., the new fiduciary definition itself) will become applicable after the 60-day delay, and the BIC Exemption and the Principal Transactions Exemption will be available as of that date but these exemptions will only require fiduciaries to adhere to the Impartial Conduct Standards for covered transactions until January 1, 2018, when the remaining conditions will apply unless revised or withdrawn. The other requirements of these PTEs, including representations of fiduciary compliance, contracts, warranties about firm’s policies and procedures, etc., will not become applicable during the period in which the Department performs the mandated examination of the Rule and PTEs. In addition, the Department has delayed the applicability of the amendments to PTE 84-24 until January 1, 2018, except that the Impartial Conduct Standards will become applicable on June 9, 2017, and the Department has extended for 60 days the applicability dates of the 2016 amendments to other previously granted exemptions
The 63 page document which addresses industry comments and other considerations can be read in its entirety at this link.
As RIA compliance consultants, we still recommend that all investment advisers make any necessary operational changes in order to qualify the firm to utilize the rule's "Level Fee Exemption" and avoid the more stringent "Best Interest Contract" requirement. We also suggest that all RIA firm principals review our past coverage of the DOL fiduciary rule:
- The Top 5 DOL Fiduciary Rule Experts Every RIA Firm Should Follow
- How an RIA Firm can Comply with the DOL Fiduciary Rule
- Part 1 of DOL Fiduciary Rule FAQs Confirms RIA Level Fee Exemption
- DOL Fiduciary Rule FAQs Part 2 Clarifies When the Rule Applies to RIAs
- The DOL Fiduciary Rule for RIA Firms: Where it Stands Today
Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.