Big fiduciary news—and could signal a broader DOL policy shift under President Trump.
While normally bullish on filing amicus (friend-of-the-court) briefs in federal appeals court cases involving 401k fiduciary issues, the department declined last week to do so in a case filed against Transamerica Life Insurance Co., Bloomberg BNA reports.
“While this move could signal a shift in DOL enforcement priorities in the Trump administration, it also could be read as a natural byproduct of a federal agency lacking top leadership following a presidential transition,” the news site adds.
It might also be a consequence of recent court outcomes favorable to service providers.
“In declining to treat these 401k service providers as ERISA fiduciaries, …courts articulated the same standard: to hold a service provider liable for fiduciary breach, the activities giving rise to fiduciary status must bear some connection to the activities giving rise to the breach,” Bloomberg noted.
It concluded that the department has “appeared to adopt a wait-and-see approach in certain matters since President Donald Trump assumed office on Jan. 20.”
Indeed, the Department of Labor announced a 60-day extension of the applicability dates of the fiduciary rule and related exemptions, including the Best Interest Contract Exemption.
The recent announcement followed a Feb. 3, 2017 presidential memorandum which directed the department to examine the fiduciary rule to ensure that it does not adversely affect the ability of Americans to gain access to retirement information and financial advice.
Under the terms of the extension, the DOL is requiring retirement advisors to act as fiduciaries and to give advice that adheres to “impartial conduct standards” beginning on June 9 rather than on April 10, 2017, as originally scheduled.
These fiduciary standard requires advisors to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services and refrain from making misleading statements.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
