Today, President Trump issued a memorandum directing the Department of Labor (DOL) to determine whether the Fiduciary Rule should be revised or completely rescinded. The memorandum generally directs the DOL to review the rule based on specific criteria and modify or rescind the rule based on that review.
Earlier this year, the DOL finalized regulations which expanded who was considered a fiduciary under ERISA by virtue of providing investment advice. (Click here for our prior Client Alert discussing the Fiduciary Rule.) In general, these regulations would have become applicable on April 10, 2017 and would have affected qualified retirement plans, IRAs and health savings accounts. In anticipation of the regulations, many service providers made changes to their services, especially with respect to distribution advice and participant education. The proposed regulations also received significant backlash from some industry groups, prompting lawsuits which sought injunctions against the Fiduciary Rule.
The memorandum directs the DOL to review the rule to determine what the Fiduciary Rule’s likely impact will be with respect to:
Investors and retirees’ access to retirement accounts and advice;
Disruptions in the retirement services industry that may adversely affect investors and retirees; and
Increased litigation and fees borne by investors and retirees.
Depending on the results of the review, the memorandum directs the DOL to issue a new proposed rule revising or rescinding the Fiduciary Rule, including a notice and comment period.
Some service providers are on record saying they will move forward with changing their services even if the Fiduciary Rule is changed or delayed. Other service providers are likely to stop making changes to their services and operations pending further clarity on the Fiduciary Rule. We recommend that plan fiduciaries reach out to their service providers and determine how they intend to respond to any delay of the Fiduciary Rule with respect to the services they provide. We also recommend that service providers evaluate how to respond in light of this memorandum and communicate their response to their clients.
If you have questions regarding the impact of this executive order or the Fiduciary Rule, please contact your Kutak Rock LLP attorney or a member of our Employee Benefits Practice Group listed in the right-hand column.