Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions, 82 Fed. Reg. 31278 (July 6, 2017); News Release 17-935-NAT (June 29, 2017)
The DOL will publish a request for information (RFI) in the July 6, 2017 Federal Register regarding its fiduciary rule on investment advice conflicts and related prohibited transaction exemptions (PTEs). As a reminder, the fiduciary rule and exemptions were effective June 7, 2016, and became applicable June 9, 2017, following a 60-day delay (see our Checkpoint article). In conjunction with the delay, the Best Interest Contract (BIC) exemption and the PTE for principal transactions (transactions in which financial institutions sell from or purchase for their own accounts) were amended to include transition relief requiring adherence only to the impartial conduct standards (which require prudent advice in the investor’s best interest, no more than reasonable compensation, and no misleading statements) through January 1, 2018. The DOL subsequently issued temporary enforcement relief and FAQ guidance addressing implementation of the rule and exemptions during the transition period between June 9, 2017 and January 1, 2018 (see our Checkpoint article). The DOL also indicated that it would issue an RFI seeking additional public input regarding possible revisions to the rule and exemptions.
The RFI summarizes comments that the DOL has received regarding the rule and exemptions, and identifies specific areas for additional comment. In addition to asking general questions about the rule’s implementation, the RFI specifically requests comments on whether communications encouraging investors to make or increase their contributions should be excluded from the rule. Most of the questions relate to the exemptions, the additional conditions that are scheduled to become applicable under the exemptions on January 1, 2018, and the costs and benefits of delaying that applicability date. For example, the RFI requests comments on the contract requirement for IRAs and HSAs, additional and more streamlined approaches that might be enabled by market innovations (e.g., clean shares), ways to simplify the BIC exemption disclosures, and alternatives for bank deposit-type investments for IRAs and HSAs. Comments about extending the January 1, 2018 applicability date for the exemptions are due within 15 days of the RFI’s publication in the Federal Register; comments about other issues are due within 30 days of that date.
EBIA Comment: Those who work with the fiduciary rule will want to read the entire RFI to learn more about the scope of changes that may be under consideration. For example, the RFI’s question regarding HSAs indicates that the DOL might consider relief for “particular classes of investment transactions” involving HSAs, but it does not suggest any inclination to reverse the DOL’s previous conclusion that, as a general matter, HSAs should be within the scope of the rule. Anyone who is interested in submitting comments should also take note of the relatively short comment period. For more information, see EBIA’s 401(k) Plans manual at Section XXIV.D (“Investment Advice Fiduciaries”) and EBIA’s Consumer-Driven Health Care manual at Section XVI.E.2 (“Who Is a ‘Fiduciary’ With Respect to an HSA?”). You may also be interested in our upcoming webinar “401(k) Fiduciary Rules: What’s New and What’s Next?” (live on 7/26/17).
Contributing Editors: EBIA Staff.