On April 7, 2017, the DOL announced that the applicability dates for its final fiduciary rule and related prohibited transaction exemptions (“PTEs”) would be delayed from April 10, 2017 to June 9, 2017, with certain provisions in the PTEs further delayed to January 1, 2018. On May 22, 2017, the DOL confirmed that as of June 9, 2017, investment advice providers to retirement plans and IRAs would become fiduciaries under ERISA, and the “impartial conduct standards” would become requirements of the PTEs. The DOL issued two pieces of guidance on May 22 in this regard.
First, in a set of Frequently Asked Questions (“FAQs”), the DOL addressed a wide array of issues concerning PTE conditions that were scheduled to become effective on April 10, 2017 but that are delayed to January 1, 2018. (That delay is intended to provide the DOL with enough time to continue conducting its ongoing examination of the fiduciary rule, as directed by President Trump.) The FAQs provide additional information on the transition period from June 9, 2017 to January 1, 2018. Notable points made in the FAQs include the following:
- During the transition period, financial institutions and advisers must comply with the “impartial conduct standards,” but certain conditions under those standards will not apply until the transition period ends (e.g., the requirement to implement specified policies and procedures to protect retirement investors from advice that is not in their best interest).
- Advisors can rely on PTE 84-24, subject to the impartial conduct standards, for recommendations involving all annuity contracts during the transition period.
- As a result of the DOL’s continuing examination of the fiduciary rule, as directed by President Trump, “it is possible, based on the results of the examination, that additional changes will be proposed.”
- During the transition period, the Best Interest Contract Exemption requires only that fiduciary advisers’ recommendations meet the final rule’s impartial conduct standards, including the obligation to give advice that is in the best interest of retirement investors.
- The FAQs provide examples of conduct that constitutes the provision of general financial, investment or retirement information that is not deemed to be “investment advice” under the final rule (e.g., providing a participant on his or her birthday with a chart explaining that if the participant increased his or her contribution rate by a specific percentage, then his or her projected retirement savings at normal retirement age could increase by a stated sum, based on specified assumptions).
- The DOL’s general approach to the June 9, 2017 implementation date “will be marked by an emphasis on compliance assistance (rather than citing violations and imposing penalties).”
Second, in connection with the final bullet above, the DOL issued Field Assistance Bulletin No. 2017-02 (the “FAB”). The FAB sets forth a new temporary enforcement policy for the transition period. Specifically, during that period, the DOL “will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions.”