For Providers, 2015 Was Year of the Fiduciary

Looking back over a year of compliance coverage on, few topics match the volume of reporting filed on the Department of Labor’s fiduciary rulemaking effort.

Heading into 2016 the Department of Labor (DOL) has clearly made real progress on getting new retirement planning advice standards in place—much to the chagrin of retirement plan industry providers.

The text of the proposed “conflict of interest” rule, as it’s now commonly called, emerged months ago and will soon be reissued in final form. Those informed enough to guess about such things project final rule language will be published as soon as January or as late as March or April.

It remains to be seen whether the final rule will factor in any of the tremendous volume of industry criticism (and, to a lesser extent, support) registered during several formal comment windows and in-person hearings; whether advisers will still be able to sell to qualified retirement plan clients on commission or other forms of variable compensation; or whether a given segment of advisers will have to start papering best interest contracts. Things should finally become clear as 2016 progresses. 

Immediately after the mid-August hearings the DOL appeared to double down on its tough-cop approach, yet later in the year Labor Secretary Thomas Perez hinted at the prospect of more flexibility in a final rule. Industry professionals, especially those on the business development side of the equation, believe the rule-as-proposed is far too restrictive, even punitive, towards an overwhelmingly upright group of companies and individual advisers.

PLANSPONSOR columnist Michael Barry, president of the Plan Advisory Services Group, a consulting group that helps financial services corporations with the regulatory issues facing their plan sponsor clients, argues the fiduciary regulations are nothing short of an “attempt by the DOL to drive brokers out of the retirement business,” perhaps in favor of emerging state-based defined contribution (DC) systems for private sector workers. The same will be true with respect to individual retirement accounts (IRAs), he argues, unless major changes are made to the rule language.

NEXT: Efforts to delay fiduciary rule progress 

In another column, Barry suggests the proposal “generally won’t affect employers with 100 or more employees,” while the so-called “seller’s carve-out” will, for the most part, allow non-fiduciary advisers to continue advising their current clients. “And it won’t affect the employers’ working participants while they are active in a plan,” he notes. “Advice has never been that important to participants. Sponsors are moving to defaults—e.g., to target-date funds (TDFs)—as the way to get participants invested in the right asset allocation.”

Columnist Stephen M. Saxon, partner with Groom Law Group, headquartered in Washington, D.C., writing with George Sepsakos, an associate in Groom’s fiduciary responsibility group, penned another article to explain the potential ways the judicial system could be pulled into the ongoing debate. “The final rule could be challenged on either procedural grounds or substantive grounds, or on both,” they write. “A lawsuit challenging a final rule on procedural grounds would need to maintain that the department failed to follow the appropriate procedures when adopting the rule.”

The most recent news on the fiduciary rulemaking effort was perhaps more show than substance. After a great deal of partisan wrangling, Congress reached an agreement on a somewhat long-term budget deal that did not include riders that would have changed or otherwise delayed the DOL’s fiduciary rulemaking. 

For many Republicans and some Democrats in both the House and the Senate this was no small defeat, given the large number of bills and proposals forwarded and/or endorsed by legislators in 2015. It took mere days for new proposals to be introduced in the wake of the budget agreement, but they have little real likelihood of making it into law before the DOL can act.

Whatever happens with the rulemaking in 2016, you’ll be able to find the most up-to-date coverage at and in PLANSPONSOR print.