DOL To Publish 18-Month Delay of Fiduciary Rule Wednesday

By John Hilton

The controversial Department of Labor fiduciary rule will be officially delayed by 18 months on Wednesday.

The DOL made the announcement this morning with a notice in the Federal Register. Publication of the delay is the final step in a months-long bureaucratic process undertaken by the Trump administration to undo the Obama-era fiduciary rule.

The action will delay the second phase of the fiduciary rule, which establishes restrictive exemptions to sell annuities and other products along with a class action right to sue, until July 1, 2019.

In the final delay rule, the DOL did not announce any changes to the fiduciary rule. But changes are likely once its fact-finding process is complete, the department wrote. In a Feb. 3 memo, President Donald J. Trump ordered the DOL to study whether it will limit retirement savers' access to advice.

"Whether, and to what extent, there will be changes to the Fiduciary Rule and PTEs as a result of this reexamination is unknown until its completion," the DOL wrote in the delay rule to be published Wednesday. "The examination will help identify any potential alternative exemptions or conditions that could reduce costs and increase benefits to all affected parties, without unduly compromising protections for retirement investors."

The pro-rule Consumer Federation of America is undecided on filing a lawsuit to keep the rule on track, said Barbara Roper, director of investor protection for the organization. But she made it clear the CFA views the delay as a repeal of the rule.

"It seems clear to us that the DOL has failed to meet its legal obligations in promulgating this rule," she said via email. "As just one example, the DOL doesn’t even pretend to carefully assess the risk of harm to investors from the delay."

The initial phase of the rule went into effect June 9.

That part of rule requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. Those are known as Impartial Conduct Standards and are already cutting off access to financial advice for small savers who need it most, industry executives say.

The final requirements of the rule were set to take effect Jan. 1, 2018.

The 18-month delay is a big win for the financial services industry, as the effective date of the most punitive measures in the rule is pushed into the horizon. The aspects of that rule might never take effect if the DOL, as expected, opts to make changes following more data collection in the coming months.

The American Council of Life Insurers applauded the move.

“The evidence before the department is clear,” said ACLI President and CEO Dirk Kempthorne. “The fiduciary regulation has harmed small and moderate retirement savers by restricting or eliminating access to retirement products and services, creating an advice gap for those most in need of help. Its bias against commission-based arrangements restricts consumer access to annuities – the only product in the marketplace providing guaranteed lifetime income."

The department received 110 comment letters supporting a delay of 18 months or longer, and 35 letters opposing any delay. Also, two petitions were submitted with about 2,850 signatures or letters supporting the delay.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.