Today (April 7, 2017), the Department of Labor (DOL) published in the Federal Register a final rule delaying the new ERISA fiduciary rule until June 9, 2017. Everyone expected a comprehensive 60-day delay to the rule, including the related Best Interest Contract Exemption (BICE) and other prohibited transaction exemptions (PTE). But, in welcome news to many, the rule also provided a significant transition period until 2018 for the more onerous requirements of the BICE, PTE 84-24 and other prohibited transaction exemptions. Here is a quick run-down of the more significant aspects of the delay:
- The applicability date for the fiduciary rule has been delayed until June 9, 2017 (i.e., 60 days following the original April 10, 2017 applicability date).
- The applicability date for the BICE, the Class Exemption for Principal Transactions, and the changes to other exemptions (PTE 75-1, 77-4, 80-83, 83-1 and 86-128) has also been delayed until June 9, 2017.
- The original PTE 84-24 remains available through the end of 2017 for insurance and all annuity sales (fixed rate, as well as fixed indexed and variable annuities). After 2018, PTE 84-24 will only be available for insurance and fixed rate annuity sales. During the transition period from June 9, 2017 through Dec. 31, 2018, the only new requirements that will apply are the Impartial Conduct Standards (act in the customer’s best interests, do not make misleading statements and receive only reasonable compensation). Notably, this means that the new disclosure and recordkeeping requirements are not applicable until 2018.
- During the transition period from June 9, 2017 through Dec. 31, 2017, those relying on the BICE need only comply with the Impartial Conduct Standards. This means that disclosure, fiduciary compliance representation, recordkeeping, and other requirements will not apply until Jan. 1, 2018. Similar delays apply to the Class Exemption for Principal Transactions.
While the delay and additional transition period relief is largely viewed as welcome news to service providers and plan sponsors, the Jan. 1, 2018 deadline for full compliance is still looming out there. And, at this point, we can only speculate whether there will be additional delays and/or changes to these rules. So, while the can was kicked down the road, service providers and plan sponsors still need to be carving out a path to full compliance.