DOL Seeks 18-Month Delay of Fiduciary Rule

The Department of Labor moved today to delay phase two of the controversial Obama-era fiduciary rule by 18 months, until July 1, 2019.

Phase two of the rule deals with exemptions, which regulate the sale of annuities sold with retirement funds. In particular, the Best Interest Contract Exemption, which requires a financial institution to accept liability for each contract and gives clients the right to sue over investment advice.

Documents were filed today with the Office of Management and Budget to delay phase two from Jan. 1, 2018, until July 1, 2019. The OMB will review the submission for publication in the Federal Register, which, barring any complications, makes the delay official.

Phase one of the DOL rule took effect June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.

Still, opponents are far more concerned with phase two rules that establish a class-action right to sue. Without the latest delay, the BICE will be required to sell fixed indexed and variable annuities beginning Jan. 1, 2018.

In addition, the DOL said the delay will apply to two other exemptions, PTE 84-24 and PTE 2016-02. The latter exemption applies to advice to individual retirement accounts and employee benefit plans.

Potential Changes

As for potential changes during the delay, Bradford Campbell said last month that the BICE is likely to be weakened. Counsel at Drinker Biddle & Reath. Campbell previously led the DOL department responsible for the fiduciary rule during the Bush administration.

The BICE requires significant disclosures, and a signed contract with the client. That contract forms the basis of litigation liability.

Removing the class-action lawsuit from the BICE is a good possibility, Campbell said, basing his opinion on statements the DOL has made so far. If the class-action right isn't scratched, it will cause problems in the courts, he predicted.

A delay will make even more likely the DOL and the Securities and Exchange Commission end up working together on a fiduciary standard the industry can live with, Campbell added.

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].

jekyllisle

So the financial industry is hoping that a law that puts investors first get pulled so the financial industry can make even more money off them
- HardtoBear
  
  Oh dear jekyllisle, I’m afraid you have drunk the Kool-Aid. This legislation does nothing to protect the consumer and is totally intended to preserve Qualified money in non-guaranteed speculative Wall Street accounts to benefit those on Wall Street at the cost of the consumer who only wants to be certain they don’t outlive their money. This Rule was written by the Elite class for the Elite class to protect the Elite class from those pesky consumers who only want to guarantee they will have income throughout their retirement. And oh, by the way, the other group that benefits enormously from this terribly written rule and regulation that was never vetted by the people’s representatives prior to being entered into the Federal Register is the Legal Profession as it gives them the write to sue individual small financial planners out of business and more importantly provides them with the right of action to create class action lawsuits where the lawyers get the big bucks and the plaintiffs get pennies at the expense of all consumers.
  I know truth is hard to bear, but don’t pick-up what they are laying down.
  - jekyllisle
    
    Look deeper into the regs surrounding health coverage, then get back to me.
    
    The financial industry is in big trouble
    - HardtoBear
      
      I’m not sure what your comment portends.
      
      ACA was terrible legislation and only insured more Americans because Medicaid expanded so dramatically at the expense of the taxpayers. The insurance companies guaranteed they would not lose with illegal, unconstitutional payments agreed to in a private deal with the then President. I’m in a State where we have one insurer in the exchange and the premiums for a 61 year old male is $1,400 month ($2,100 for a smoker) with a $10,000 deductible; the fine is way cheaper. Prior to ACA we had 14 insurance companies competing and the same male would have paid around $200 for a $2,500 deductible plan with $10 co-pays for routine and well-care visits. Oh, and they could keep their Doctor.
      
      If you’re suggesting the financial industry is in trouble because of DOL, I would suggest the consumer is going to get exactly what they got from ACA. Wall Street will be successful in stemming the outflow of money, almost 60,000,000 in 2016, into insured guaranteed products so they will win. The consumer will lose because they won’t have the same access they have now to guaranteed product and all of their retirement money will remain at risk paying fees throughout their 30+ years of retirement. Annuity manufacturers will most likely pay the largest cost, except for the tens of thousands of mostly really good salespeople who will be forced out of a career. But I have faith most of the providers will figure out a way (many already have) to provide commission free annuities sold through Wall Street brokers who can then fee the client for life for the protection so many of them need to preserve their lifestyle throughout the unknown length of their retirement.
      
      This legislation also confuses the financial industry terribly. The SEC has their fiduciary standards, rules, and regulations and now the DOL, who does not have an enforcement arm like FINRA, has it’s own regulations. DOL rules will be written by the courts through lawsuits. Well, that should work just fine. The DOL rule was originally an attack on variable annuities and rightfully so, but where there is a transference of risk on the loss of principle as in fixed insurance products, they should not be regulated the same as product lacking that transference of risk.
      
      I’m not sure if this addresses your comment or not, but if you care to elucidate I’ll try to respond. Who knows, maybe we will find some agreement if that would not be too hard to bear.
      - jekyllisle
        
        It has nothing to do with the ACA, Regs have been on the books since 1993, then revamped in 2003.
        
        Ultimately, the advice from the financial industry is wrong when your health is on the line as most financial plans drive up costs associated to it
      - HardtoBear
        
        Okay. I’m not sure I know what you mean, but any financial plan that does not consider increased health care costs is certainly hard to bear.
      - jekyllisle
        
        So in retirement you have to enroll into Medicare when eligible and you are no longer covered by a creditable health plan through an employer.
        
        Medicare is means tested through IRMAA as it counts income to see how much you will pay.
        
        Income is your adjusted gross income plus any tax exempt interest you may have…thus your 401(k) and 100% of your Social Security benefit
        
        So the advice that the financial industry is giving leads to higher health costs.
        
        The next factor: the bulk of these costs are deducted by federal law directly from any Social Security benefit you may recieve.
        
        Question: is there a financial planning software that shows health costs increasing by as much 220% when certain income limits are reached?
        
        Question: is there a financial planning software that follows federal law and shows Social Security benefits being reduced by Medicare charges throughout retirement?
        
        The answer – NO.
        
        So the DOL is created to utterly destroy the financial industry, all it will take is one law firm to figure out federal law
      - HardtoBear
        
        Yup, common ground. Your correct and I agree, which is why I have built all my own software that takes Medicare premiums, means testing, Required Minimum Distributions, Annuity Income (withdrawals, annuitization, and/or Income riders, and even Longevity Annuities) into consideration as well as investment income and Capital Gains to calculate true net retirement income. I then realized I could take it further and run comparisons with Roth IRA conversions producing tax free non-reportable income to calculate the true tax savings and health care tax savings throughout a retirement life or lives. The results are astonishing. Of course all of the projections are based upon current law and we know as we work the benefits to the greater good of those who worked to create their own futures the government will change the laws to try and recover more and more of what we are able to save. But we can only work with current law and make assumptions on inflation and increased taxation and work to help people plan as best we can for what is truly unknown; how long will an individual live and how onerous will taxes, rules, and regulations become. Yes, the Fed is out to get more control of the Financial and the Insurance Industries and they regulate many good people out of the business every year and they have opened the door for the lawyers and Judges to determine and write the rules and regulations through litigation, but in the end we can still help ourselves and others and that is what good planning is all about. I wish you a happy and successful future.
      - jekyllisle
        
        Glad to read your comments…look at Jester Financial Technologies, they have the software and the data. Heard them speak a few years back