A few days after saying it would extend the applicability and effective dates of the final rule on investment advice under the Pension Protection Act (PPA) to May 17, 2010, the Department of Labor’s Employee Benefits Security Administration (EBSA) announced November 19 that it is withdrawing the final rule on the provision of investment advice under the Employee Retirement Income Security Act’s prohibited transaction provisions.
The DOL’s notice “withdraws the January 21, 2009, final rule that implemented a statutory prohibited transaction exemption under the PPA, and provided an additional administrative class exemption.” DOL says it “decided to withdraw the rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule and the class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries.”
Now, the extended applicability and effective dates of the final rule until May 17, 2010, expires upon the effective date of this withdrawal, which won’t be published in the Federal Register until November 20. As Fred Reish of Reish & Reicher in Los Angeles, which specializes in employee benefits law, notes, “The withdrawal will likely be effective when published on November 20.” On November 20, Reish continues, “the old reg will ‘die’ and the extension will die also. There will then be no reg at all and, since there is no reg, there will not be any effective date. Then somewhere in the next 30 to 45 days, the Office of Management and Budget (OMB) will approve the new proposed reg that the DOL sent to them about four weeks ago, and the DOL will publish that proposed reg for comments.” DOL says it “intends to publish separately a proposed rule that conforms to the PPA statutory exemption relating to investment advice.”
Reish says that the DOL’s conclusion about withdrawing the rule “is not surprising, but the process is.” The conclusion is not surprising, he says, “because the DOL has publicly stated that the regulation promulgated by the Bush Administration would not survive in its current form. Based on the delay of the effective date, the benefits community had assumed that the revised final regulation would be published before the extended date of May 17, 2010, and that the ‘old’ regulation would simply be replaced by the new regulation.” However, Reish continues, “the process being used by the DOL is a little surprising because it’s not clear why they would need to both extend the effective date and withdraw the regulation. On the face of it, it appears that the answer of it is that the withdrawal couldn’t get published, for whatever reason, before the effective date of November 17, 2009.”