DOL Issues Temporary Enforcement Policy Regarding ERISA Fiduciary Rule
Author: Rena Pirsos, XpertHR Legal Editor
March 20, 2017
The US Department of Labor (DOL) has issued a temporary enforcement policy relating to its recently proposed 60-day extension of the applicability date of the final rule defining who is a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, and the applicability date of the related prohibited transaction exemptions - the Best Interest Contract Exemption (BICE) and the Principal Transactions Exemption (PTE).
The final rule took effect June 7, 2016, with compliance to begin April 10, 2017. The BICE and PTE are being phased in, with full compliance beginning January 1, 2018. The DOL proposed the 60-day delay of the rule's applicability date, to June 9, 2017, in response to a Trump administration memorandum directing the agency to examine the rule to determine whether it may adversely affect access to retirement information and financial advice.
The DOL says it has issued the temporary enforcement policy to address uncertainty about whether:
- A final rule implementing any delay will be published before April 10;
- There will be a "gap" period during which the rule becomes applicable before a delay is published after April 10; or
- The DOL may decide either before or after April 10 not to issue a delay.
The temporary enforcement policy provides the following two scenarios:
- If the DOL delays the applicability date of the fiduciary duty rule and PTEs after April 10, it will not initiate an enforcement action because an adviser or financial institution did not satisfy conditions of the rule or the PTEs during the "gap" period in which the rule becomes applicable before a delay is implemented, including a failure to provide retirement investors with disclosures or other documents intended to comply with provisions of the rule or the related PTEs; and
- If the DOL does not issue a delay at all, it will not initiate an enforcement action because an adviser or financial institution, as of the rule's April 10 applicability date, failed to satisfy conditions of the rule or the PTEs provided that the adviser or financial institution satisfies the applicable conditions of the rule or PTEs, including sending out required disclosures or other documents to retirement investors, within a reasonable period after the publication of a decision not to issue a delay. The DOL also notes that it will treat the 30-day cure period under the BICE and PTE as available to financial institutions that, as of April 10, did not provide retirement investors with the disclosures or other documents described in the exemptions.
The DOL states that it will consider issuing additional temporary relief, including prohibited transaction relief, if necessary.