A Donald Trump presidency will certainly have some consequences for the retirement industry — not the least of which will be the delay, modification or repeal of the Department of Labor’s fiduciary rules, which are set to be implemented by April 10.
Brad Campbell, counsel in the employee benefits and executive compensation practice group at Drinker Biddle & Reath LLP, said late last week during his company’s “Inside the Beltway” series that although he doesn’t know when the new administration will stop the rule from moving forward, he expects it any day now.
“The DOL fiduciary rule itself is not something that can be whisked away with the stroke of a pen,” Campbell said. “What we’re hearing is that this rule will likely be delayed in the near future. We are expecting an announcement at any time to see if the rule is going to be delayed. The rumors we are hearing is that the first action will be to delay the rule by six months.”
The second step, he said, will be to determine whether to repeal or modify the rule.
There has been a lot of interest among retirement industry insiders to repeal the rule, which expands who is and isn’t a fiduciary when it comes to providing advice to retirement plans. The rule went into effect last June, but it gave advisers, financial institutions and insurance companies nearly a year to comply with the many complexities of the regulation.
Department of Labor Secretary-nominee Andrew Puzder, CEO of CKE Restaurants, has not mentioned the fiduciary rule yet, but “other Trump officials have been very critical of the fiduciary rule,” Campbell said. “At a minimum, it will be modified and potentially repealed. We don’t know who the personnel will be making the final decisions.”
There is not yet a nominee to lead the Employee Benefit Security Administration.
Still, because nobody has stepped up to stop the rule yet, people in the industry who are not currently considered fiduciaries need to keep the April 10 deadline in their sights. There is a transition period for implementation of the rule’s provisions that extends until the end of 2017. Compliance during this soft launch will be much easier for companies than the full rules, experts say.
Campbell pointed out that the transition period will still go forward, even if the rule is eventually repealed. Broker dealers and insurance agents should make sure they process their transition documentation in the next six weeks so it gets in before the April 10 deadline, whether the rule goes into effect or not.
“Everybody needs to be in a position to do transition notices and disclosures,” said Fred Reish, a partner in the employee benefits and executive compensation practice group and chair of the financial services ERISA team and the retirement income team at Drinker Biddle & Reath. “We’re drafting a lot of those right now.”
Companies that have not yet set things up or attempted to comply with the best interest contract exemptions before that April 10 deadline will be “out of business unless they are a pure level fee adviser,” Reish said.
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