Compliance

Trump Presidency Will Impact Providers' Fiduciary Rule Response

Early commentators warn anything is possible, but there may be some relief coming on the strict contract and recordkeeping requirements in the DOL fiduciary rulemaking.

By John Manganaro editors@plansponsor.com | November 09, 2016
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“Bearing in mind that anything is possible, the most likely scenario we see is that the Department of Labor (DOL) fiduciary rule will move forward on its current schedule with implementation on April 10, 2017,” says Duane Thompson, senior policy analyst at fi360.

Joining a chorus of firms to share preliminary commentary with PLANSPONSOR, Thompson predicts that the Republican President-elect Donald Trump “may not even have a DOL secretary, or assistant secretary that runs the Employee Benefits Security Administration, nominated or approved by the Senate by April 10.”

Thompson further suggests it is “certainly possible” that when the new DOL secretary comes in, since the Best Interest Contract Exemption (BICE) and Principal Transaction requirements don’t take full effect until January 1, 2018, “this compliance deadline could be extended out.” In other words, it appears at least preliminary that there may be some relief coming on the strict contract and related recordkeeping requirements in the rulemaking.

However this may not actually be viewed as a positive by all retirement industry providers, as the election clearly puts the growing number of brokerage and advisory firms that have already made significant changes to compensation structures in a difficult spot. Beyond this, literally dozens of providers, if not more, have in the last several years rolled out new tools and solutions specifically aimed at helping brokers, advisers, and their plan sponsor clients comply with the tenants of the conflict of interest rulemaking. 

According to Thompson, the “option of falling back on an expedited legislative review process” also appears highly unlikely. 

“The Congressional Review Act says after a final regulation is published, Congress has 60 ­legislative days to act on a disapproval motion. Since Congress has already acted with a resolution to overturn the rule, and failed to secure passage earlier this year, due to a presidential veto, the CRA doesn’t appear to be a viable option for a Trump White House and the 115th Congress,” Thompson says. “Of course, the new Congress could start all over again and go through the regular legislative process by introducing a bill and going through an often time-consuming legislative process in both houses. That’s certainly possible, except that it runs the risk of having Senate Democrats blocking the measure.”

Thompson warns there is also an outstanding question of “whether industry would even lobby to overturn the rule since they would have to go back to square one and reconfigure their compliance systems and product lineups this far into the implementation process.”

“In addition, we haven’t heard a specific position from President-elect Trump on the DOL rule, although one of his campaign aides said it should be overturned,” he concludes. “It is certainly possible that a Trump Administration could look at ways to administratively broaden the safe harbors for conflicted advice or avoiding fiduciary status, but it would be extremely difficult to roll back the rule in its entirety.”

NEXT: Broader commentary is equally uncertain 

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