Industry officials, advisors as well as consumer advocates were quick to weigh in on the Department of Labor’s plan, announced Wednesday, to delay implementation of its fiduciary rule by 60 days.
The proposal, released early Wednesday morning, allows for a 15-day comment period on Labor’s plan to move the rule’s first compliance date from April 10 to June 9.
“The proposed delay provides time for the administration to conduct a thoughtful review of the issue and [the fiduciary rule’s] harmful impact on retirement savers” as directed in the Feb. 3 memorandum by President Donald Trump, said the American Council of Life Insurers in a statement.
ACLI said Trump’s directive to Labor to conduct an updated economic and legal analysis of the regulation “will reveal its significant problems, especially for Americans who want and need annuities, the only products in the marketplace that guarantee lifetime income.”
The DOL proposal notes the only 45 days until the April 10 compliance date for the final rule and the prohibited transaction exemptions.
Labor argued the 60-day extension is needed because it “may take more time than that to complete the examination mandated by the president’s memorandum.”
Also, Labor said, “absent an extension of the applicability date, if the examination prompts the Department to propose rescinding or revising the rule, affected advisors, retirement investors and other stakeholders might face two major changes in the regulatory environment rather than one. This could unnecessarily disrupt the marketplace, producing frictional costs that are not offset by commensurate benefits. This proposed 60-day extension of the applicability date aims to guard against this risk.”
Fred Reish, partner in Drinker Biddle & Reath’s employee benefits and executive compensation practice group in Los Angeles, said that Labor, with a 60-day delay plan, is “setting the stage to make the final rule effective immediately. In other words, if the DOL, after receiving comments, writes a final regulation delaying the applicability date — which is probable — that will be sent to the Office of Management and Budget for approval. It will probably be reviewed and released by the OMB in the two weeks preceding the April 10 applicability date.”
Ordinarily, Reish explains, “final regulations have a deferred effective date, but that would not work well in this case because the April 10 date wouldn’t be effectively delayed until after April 10, creating all kinds of difficulty. As a result, I believe the DOL will assert that the final rule should be effective immediately and before April 10, and the statements in the preamble are to set the stage for that.”