Contact Us (858) 444-2300

Blog

Further Delay in Implementation of New Fiduciary Rules

Posted by Corey F. Schechter | Sep 15, 2017

The proposed implementation of changes in the Best Interest Contract Exemption and fiduciary rules will be further delayed until January 1, 2019. Previously, the transition period extended from June 9, 2017, to January 1, 2018. According to the Department of Labor, the extended delay will give the department time to consider changes and alternatives.

As we previously reported, a new ERISA fiduciary rule was supposed to go into effect in April of 2017. This was initially delayed until June 9, 2017, to review the regulation and determine how the rule would impact investors. The transition period for the new DOL fiduciary rules began on June 9th, with full implementation by January 1, 2018. However, with the latest notice from the DOL, the implementation looks to be delayed by another year, until 2019.

The changes to the fiduciary rule will extend the definition of a "fiduciary” under ERISA to many financial advisers, subjecting them to the fiduciary duty to act in the best interest of their clients. This includes individuals who provide advice for a fee on acquiring, holding, or disposing of investment property and recommendations on how rollover distributions should be invested.

According to the notice, the purpose of the extension is to “give the Department of Labor the time necessary to consider possible changes and alternatives to these exemptions. The Department is particularly concerned that, without a delay in the applicability dates, regulated parties may incur an undue expense to comply with conditions or requirements that it ultimately determines to revise or repeal.”

The first delay came after a presidential memorandum directing the DOL to extend implementation of the new rules, in part, to request comments on the changes. The Information Company Institute (ICI), a trade group that represents financial services companies, has opposed the new rules. The ICI requested the DOL to delay the rule implementation until January 1, 2020.

The extension applies to the Fiduciary Rule, Best Interest Contract (BIC) Exemption, and Principal Transactions Exemption. However, as of June 9, 2017, “financial institutions” and “advisers” must comply with the Impartial Conduct Standards changes. This requires advisers to give prudent advice that is in a retirement investor's best interest, charge no more than reasonable compensation, and avoid misleading statements.

The BIC Exemption would require financial institutions to enter into an enforceable contract with IRA owners to abide by impartial conduct standards. IRA owners would be able to enforce their contractual rights under state law if financial advisers breached their fiduciary duty to the account owner.

Financial institutions will also be required to have policies in place to mitigate conflicts of interests. Specifically, this includes Impartial Conduct Standards that the financial institutions will not rely on quotas, bonuses, special awards, or differential compensation that may cause advisers to make recommendations that are not in the best interest of the retirement investor.

Butterfield Schechter LLP is San Diego County's largest firm focusing its law practice on employee benefits law, fiduciary counseling, and tax law. Our firm can help your company prepare for federal and state legislative changes and comply with fiduciary requirements. Contact our office today with any questions on how we can help you and your business succeed.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

Sample

Subscribe to our Newsletter

Menu