Compliance

DOL Brief Defends Fiduciary Rule Despite Ongoing Review

Long-term, DOL staff is concerned about maintaining the department’s broad litigation and enforcement capabilities in the retirement plan services marketplace.

By John Manganaro editors@plansponsor.com | July 05, 2017
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The U.S. Department of Labor (DOL) has submitted a lengthy new brief in the consolidated lawsuit filed by investment and insurance industry trade groups against the Obama-era fiduciary rule expansion, which took effect in transitional form in early June.

By way of background, the consolidated case discussed in the brief is pending in the 5th U.S. Circuit Court of Appeals, following a series of lower court decisions that largely sided with the DOL. The court has scheduled the appeal for oral argument on July 31, 2017. All told, arguments presented in the consolidated appeal are drawn from three distinct and diverse suits filed in the last year to halt the fiduciary rule expansion by investment and insurance trade groups, among others, such as the U.S. Chamber of Commerce.

Before digging into the text of the brief, it may be helpful for readers to first reflect on commentary shared by Timothy D. Hauser, deputy assistant secretary for Program Operations of the DOL’s Employee Benefits Security Administration (EBSA), who recently spoke to attendees of the 2017 PLANSPONSOR National Conference. Asked directly about the prospects for the fiduciary rulemaking, he suggested the multifaceted approach being taken by DOL “reflects the fact that we want to move forward on two tracks.”

“We are doing an analysis of issues brought up by Trump [i.e., by the lawsuits] and we are also considering new points of view people have expressed since the rule has started taking effect, which together means we are thinking about possible new exemptions that may be more streamlined and build upon changes we’ve seen in the advice marketplace that have already have come from the impact of this rule,” Hauser explained. In other words, DOL is seeking a happy middle ground between strict advice standards and an open/active marketplace that leverages developments in new share classes, as well as the development of new transparency tools to help people make better individual retirement account (IRA) rollover decisions.

Hauser told attendees outright that long-term DOL staff—who have been hired over the decades by both political parties—wholeheartedly believe there are deep conflicts of interest that exist in the investment and insurance advice domain. And so there frankly remains a lot of enthusiasm within the department to implement stricter rules, even with a new executive branch leader who has been rhetorically skeptical of the role of financial market regulation. The DOL has issued a request for information (RFI) about the fiduciary rule. Hauser noted there very well may be significant changes made to the fiduciary rule after the RFI process plays out.

As Hauser concluded, the effective date of most conditions of the stricter conflict of interest rules were moved back to January 2018, “and it’s possible the DOL will move other provisions to later than that, particularly if it decides to issue another streamlined exemption or alter terms of current exemptions so providers don’t have to engage in new system builds, if it decides there are better approaches.”

NEXT: What’s in the new DOL brief?

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