During any transition of presidential power between the two predominant American political parties, there is bound to be some operational friction.
The status of the Department of Labor (DOL) clearly demonstrates just how bumpy the transition can be when a wide gulf in policy objectives exists between the former and current president—as is clearly the case with former President Obama and his Republican predecessor, Donald Trump. Nothing embodies the challenge of transition better than the ongoing fight to “repeal” the strict conflict of interest rules implemented late in Obama’s tenure, with compliance deadlines extending well into President Trump’s current term.
The latest news is that DOL has published a proposed extension of the applicability dates of the fiduciary rule and related exemptions, including the best interest contract (BIC) exemption, from April 10 to June 9, 2017. The announcement follows a presidential memorandum issued on February 3, 2017, which directed the department to examine the fiduciary rule to determine whether it “may adversely affect the ability of Americans to gain access to retirement information and financial advice.”
A number of Employee Retirement Income Security Act (ERISA) attorneys have told PLANSPONSOR that the 15-day comment period allowed for this extension is “extraordinarily short.” Among them is Nancy Ross, a partner in Mayer Brown's Chicago office and a member of the Litigation and Dispute Resolution Practice.
“It was quite a surprise, frankly, to see the 15-day comment period on a piece of regulation deemed economically significant by the Office of Management and Budget,” she says. “It is going to be such a hardship on the people who are most affected, to get in their comments about what a delay may mean for them. Based on what I have heard, many asset managers and providers really don’t know what to do next.”
Ross agrees that, even with the DOL actively reviewing the fiduciary standard, it will be very difficult to do a wholesale reversal, because the broad regulations were properly established and implemented under the law.
“One of the potential outcomes is that they could leave the rule or portions of the rule on the books and just decide not to enforce it actively,” Ross speculates. “This might sound attractive to providers, but remember, there is citizen enforcement coded into the rulemaking, and so private litigation is very likely if the rulemaking is left on the books.”
Ross cautions that such an outlook is still pure speculation at this point.
NEXT: DOL Secretary role still wide open