All Eyes on Acosta as DOL Rule Clock Winds Down

By John Hilton

If changes to the Department of Labor fiduciary rule are not made soon, the chances of any concessions go down sharply, industry officials say.

The main thrust of the rule – that anyone working with retirement dollars adhere to a fiduciary standard – is scheduled to take effect June 9. Industry representatives are furiously lobbying the DOL for another delay.

Opponents are pinning their hopes for an 11th hour reprieve from new Labor Secretary Alexander Acosta, who was finally sworn in April 28. While he hasn’t spoken publicly on the fiduciary rule, Acosta wants to freeze the rule permanently, according to an email a Senate aide sent to rule opponents on Tuesday.

That was welcome news to rule opponents.

“Things need to be done within the next week to 10 days,” said Chip Anderson, executive director of the National Association for Fixed Annuities. “The time crunch right now makes it critical that we get something done.”

Here is where the three-part rule stands:

• The fiduciary rule: This will go into effect June 9 and requires anyone working with retirement dollars to act in the best interest of the client at all times, and be able to prove it, or face possibility of a lawsuit.
• The Best Interest Contract Exemption: The rule requires a BICE to sell variable and fixed indexed annuities. But the BICE mandates, which include hefty disclosures and a signed contract, among others, will not go into effect until Jan. 1, 2018.
• The Prohibited Transaction 84-24: The rule adds Impartial Conduct Standards to PTE 84-24, which include acting as a fiduciary, accept only “reasonable” compensation, and make no materially misleading statements. The DOL is permitting the sale of fixed indexed annuities and variable annuities with commission under PTE 84-24 until Jan. 1, 2018.

Up to Acosta

The question for rule opponents is whether Acosta will carry out President Donald J. Trump’s anti-regulatory mandate, and if there is even enough time to do so.

Trump’s Feb. 3 memo tasked the DOL with delaying the rule to study whether the rule will deprive Americans of retirement advice and/or add undo cost burdens. Lacking a secretary, DOL took five weeks to produce a 60-day delay.

The short delay frustrated rule opponents. After all, Anderson noted, the comment period on the questions raised by the president’s memo just ended on April 17.

“They delayed or dragged their feet on this,” he said. "Only giving a 60-day delay was never enough time for the DOL to review all the information they needed to look at."

It is logical to assume that Acosta will carry out Trump’s directive, as he suggested he would during his confirmation hearing. But at least one Beltway insider said killing the rule is not the slam dunk it might seem.

Acosta is a Harvard Law School graduate, former clerk to Supreme Court Justice Samuel Alito, a former U.S. Attorney and a former law school dean. He isn’t likely to endorse a strategy destined to fail legal scrutiny, the analyst said.

The secretary is “between a rock and a hard place,” added another legal analyst. Although Acosta reportedly told Sen Tim Scott, R-S.C., that the fiduciary rule is his No. 1 priority, budget concerns are immediate.

Trump’s preliminary budget cuts 21 percent from the DOL.

Final Push

Although the DOL staff wrote the 60-day delay with language making it hard to delay the rule again, Anderson is hopeful that Acosta getting his own staff in place bodes well for rule opponents.

The industry’s full-court press includes print ads in Roll Call and The Hill, along with digital ads on Twitter. The American Council of Life Insurers also began advertising this week in Politico Morning Money for fiduciary regulation opponents to register their complaints.

Still, if June 9 comes and goes without a delay, the fiduciary standard will likely be in place for good, industry sources say.

There is a chance the BIC and the PTE 84-24 exemptions could be delayed past the Jan. 1, 2018 deadline. But with the fiduciary standard in place, opponents say the liability issue will hurt the industry and make it tougher for small savers to get access to financial advice.

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].