In last year’s IA 25, we said that former Labor Secretary Thomas Perez would be credited with forever changing the retirement advice landscape due to his perseverance in getting the fiduciary rule across the finish line. Oddly, the same can be said this year of new Labor Secretary R. Alexander Acosta.
The full Senate confirmed Acosta as Labor Secretary on April 27 by a 60-38 vote. Under his direction, Acosta will be in charge of unwinding – and potentially killing – Labor’s fiduciary rule. A rule six years in the making.
Indeed, he was bombarded with letters from lawmakers his first day on the job pressuring him to further delay the rule’s June 9 compliance date or delay it permanently.
At his confirmation hearing in mid-March before the HELP Committee, Acosta — former law dean at the public Florida International University in Miami – said that he would follow President Donald Trump’s Feb. 3 executive order directing Labor to review its fiduciary rule.
Not long after, Labor issued a final rule delaying the fiduciary rule’s compliance date — from April 10 to June 9 — after getting the okay from the Office of Management and Budget.
While the effective date has been pushed back, the debate over the fiduciary rule’s content and the structure of the related exemptions “is far from over,” noted ERISA attorneys Fred Reish and Joshua Waldbeser, in a recent alert to clients. The regulation included additional surprises related to the expanded definition of “fiduciary” investment advice, PTE 84-24 (which deals with annuities) and the transition period of the Best Interest Contract Exemption.
“It appears likely that there will be more changes made to the rule and exemptions, following the DOL’s review process,” the Drinker Biddle attorneys said.
Further delays beyond June 9 “may still be possible given the presidential order directing the DOL to review” the rule and decide whether it should be revised or withdrawn, Reish and Waldbeser said.
Allison Weilobob, counsel with Sutherland Eversheds, said Wednesday that under Acosta’s leadership, “any change to the rule’s course for the rest of 2017 (as set in the delay rulemaking) won’t be made until sometime after June 9.” So the rule will kick in on that date, she predicts.
Waldbeser agreed. “It would take some very quick and decisive work to get another delay pushed through before June 9,” he said Wednesday. “Also, the tenor of the existing delaying regulation indicates that no further delays should be expected in the short term. My consistent advice to clients has been to assume that the applicability date will in fact come to pass on June 9, and to prepare for compliance with the limited requirements in the PT exemptions during the transition period.”
Reish concurred, stating that he expects the rule will apply on June 9, “but that then the DOL will be reviewing the impact of the rule and the exemptions on investors, as outlined in the Presidential Memorandum.”
If all goes as expected, Reish continued, “we could see proposed amendments to the rule and exemptions shortly after Labor Day and the final versions around the first of November. But that strikes me as ambitious. As a result, I wouldn’t be surprised to see the fiduciary rule stay in effect as is for another six months or so into 2018 — and for the transition versions of the exemptions to continue for that period as well.”
— Read Frontrunners: The 2017 IA 25 on ThinkAdvisor.