Yesterday, the Department of Labor (“DOL”) released guidance indicating that the Fiduciary Rule (discussed previously in our April 10, 2017 Client Alert and our April 7, 2016 Client Alert) will begin to apply on June 9, 2017. In an editorial in the Wall Street Journal published May 22, 2017, DOL Secretary Acosta stated that there was “no principled legal basis” to change the June 9 date. While the DOL will not delay the June 9, 2017 applicability date, further changes to the rule are possible before January 1, 2018, when the rule’s transition period ends.
In connection with the guidance, the DOL issued a temporary enforcement policy stating that it (and the IRS) would not pursue claims against fiduciaries who are working diligently and in good faith to comply with the rule, or treat them as being in violation of the rule.
In part, the latest guidance also reiterates that advisers relying on the Best Interest Contract exemption need only act using impartial conduct standards from June 9, 2017 to January 1, 2018. When fully implemented, the Best Interest Contract exemption will require advisers to adhere to impartial conduct standards and provide a variety of disclosures to participants.
Many service providers intend to use the Best Interest Contract exemption to provide fiduciary advice to plan participants, and are in various stages of rolling out the disclosures required by the exemption. This means that, during the transition period, service providers may be giving fiduciary advice to participants without providing full disclosures. Fiduciaries need to understand what their service providers’ processes will be during the transition period and determine whether a good faith effort is being made to act in participants’ best interest.
If you have any questions regarding the impact of the Fiduciary Rule, please contact a member of our Employee Benefits Practice Group.