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Regulation and Compliance > Federal Regulation > DOL

3 Reasons DOL Fiduciary Rule Will Stay Intact: ERISA Attorney Wagner

By Melanie Waddell

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ERISA attorney Marcia Wagner sees three reasons why the “tortured” Department of Labor fiduciary rule will prevail, noting the importance of the rule to the nation’s private pension system. 

The Trump administration being the third one to look at the rule — behind the administrations of Presidents Barack Obama and George W. Bush (yes, at the time it was called the Investment Advice Rule) — “shows you how incredibly important the private pension system, broadly defined, is to our safety net of this country,” Wagner said Tuesday at the Financial Planning Association’s annual lobbying day in Washington.

(Related: House GOP Introduces Bill to Overturn DOL Fiduciary Rule)

“Appropriate oversight of fiduciary activity is necessary to protect retail investors who rely on pension and IRA assets for their security in old age … without due protections – and we can debate if the fiduciary rule goes too far or far enough – the U.S. can find itself in the unenviable position of countries where adequate protections are nonexistent, and people are invariably harmed.”

Wagner, an attorney with the Wagner Law Group who is a ThinkAdvisor contributor, gave three reasons why she believes Labor’s fiduciary rule will remain in “substantially similar condition”:

  • The entities affected by the rule “have already devoted considerable time, expertise, money and resources from marketing to legal to IT in determining appropriate implementation.”
  • There’s really “no clear course of action if this rule doesn’t go forward,” she said. “We really can’t go back to the 1976 regulation defining investment advice on that five-pronged test. That standard is … frankly, very dated.”
  • The fiduciary law is “going to go forward in substantially similar condition as it is right now because the opposition to the rule … is gone. Certain areas of the industry are in favor, certain others aren’t. United, people can do a lot; divided, the government will get what it wants. In my view, .… the vector of this rule is the correct way to go for our country.”

As of June 9, parts of the rule became effective — the definition of fiduciary has been “significantly expanded” and is in effect now, as well as the impartial conduct standard, Wagner said. Full applicability with the rule will occur, as of now, on Jan. 1.

Also in force as of June 9 is a “non-enforcement policy” by Labor, which the IRS will follow, that requires advisors “behave in reasonable and good-faith compliance with the law into Dec. 31, 2017.”

However, Wagner warned, the non-enforcement policy “does not mean that private litigants can’t litigate. It also doesn’t mean that if you don’t have reasonable, good-faith compliance that there won’t be … action taken” by Labor or the IRS.

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