Last week, President Trump issued a memorandum directing the Department of Labor (DOL) to reconsider implementation of the fiduciary rule. The fiduciary rule, which widens the scope of who is considered a “fiduciary” of an employee benefit plan under ERISA and under what circumstances an advisor provides “investment advice,” has been met with considerable criticism in some circles.
Many expected President Trump to delay or overturn the rule, but at least initially, he has declined to do so. Trump’s memorandum did not delay, withdraw or revise the fiduciary rule in any way. His memorandum merely tasked the DOL with reconsidering the fiduciary rule in light of whether it could negatively affect the ability of consumers to gain access to retirement and investment advice. Specifically, Trump requested legal and economic analysis as to whether the fiduciary rule will:
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Limit investor access to retirement products and information;
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Inflict a negative disruption in the financial industry that will hurt investors; and
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Engender unnecessary litigation, the price of which will be passed along to consumers in the form of higher costs.
Trump’s restraint surprised some commentators, who at the very least expected the president to delay the April 10, 2017, implementation of the rule. Further adding to the confusion, a federal judge in Texas upheld a challenge to the fiduciary rule brought by the Indexed Annuity Leadership Council and the American Council of Life Insurers. In her ruling, Judge Barbara Lynn, despite a request from the Department of Justice (DOJ) to stay the case in light of the President’s memorandum, granted the DOJ’s previous motion for summary judgment anyway.
“The imposition of the duties of loyalty and prudence are reasonable given the DOL’s findings on the negative impact that conflicted transactions have on retirement investors and that the new standards could save retirement investors up to $36 billion over the next 10 years, and $76 billion over the next 20 years,” Judge Lynn wrote.
Today, reports surfaced that the DOL has sent documents to the Office of Management and Budget (OMB) that will delay the fiduciary rule’s implementation for 180 days. While it is impossible to confirm these reports until the OMB releases the DOL’s latest proposal to the public, it appears increasingly likely that the effective date of the fiduciary rule may be delayed. We advise clients affected by the rule to monitor the situation actively.
