As the scheduled effective date for the Department of Labor’s Retirement Security Rule is now just 3 months away, now seems like a good time for an update.
The controversial fiduciary investment advice final rule—frequently referred to simply as the Fiduciary Rule—has already seen a pair of legal challenges that are still pending and a “Resolution of Disapproval” under the Congressional Review Act that seeks to invalidate the rule.
Currently, the Final Rule and amendments to the Prohibited Transaction Exemptions (PTEs) are set to become effective Sept. 23, 2024, and will apply to investment advice provided on or after that date. The amended PTEs also include a one-year transition period.
Here’s a look at some recent news and happenings involving the rule.
House Committee hearing set for Thursday
The House Education and Workforce Subcommittee on Health, Employment, Labor, and Pensions is scheduled to hold a hearing titled, “Examining the Policies and Priorities of the Employee Benefits Security Administration” on Thursday, June 27 at 10:15 a.m. EDT.
This will be the first congressional hearing about EBSA policies since the DOL finalized its Retirement Security rule. Lisa Gomez, Assistant Secretary for Employee Benefits Security, is expected to testify. Committee Chairman Rep. Bob Good (R-VA) will lead the proceedings.
“Instead of advancing initiatives to strengthen and improve employer-sponsored health care plans, the Employee Benefits Security Administration’s (EBSA) imprudent regulatory efforts have saddled American workers with higher costs, fewer benefits, and less flexibility,” Rep. Good said in a statement. “To make matters worse, its retirement regulations have pushed environmental and social issues over maximizing Americans’ savings and return on investments. This hearing will not only shine a light on EBSA’s misguided regulatory agenda, but it will also examine Assistant Secretary Lisa Gomez’s involvement in taxpayer funds erroneously paid to pensions plans for deceased participants.”
The hearing will be live-streamed on the Committee’s YouTube page.
DOL responds to fiduciary rule lawsuit
Last week, the Department of Labor filed an “opposition to plaintiffs’ motion for preliminary injunction” to counter a lawsuit from the Federation of Americans for Consumer Choice aiming to halt the implementation of the fiduciary rule. The fiduciary rule requires financial advisors to act in the best interests of their clients when advising on retirement accounts.
“Contrary to Plaintiffs’ wishful thinking, ERISA does not inherently exclude investment advice about plan assets when insurance agents are involved.”
June 14 DOL filing
The FACC, which represents annuity and life insurance firms, a handful of insurance firms and independent agents, filed the preliminary injunction on May 21 in the U.S. District Court for the Eastern District of Texas. The suit argues that if applied, the new fiduciary rule would cause “dire consequences for tens of thousands of independent insurance agents and their clientele if not stopped.”
The DOL isn’t buying it. “Contrary to Plaintiffs’ wishful thinking, ERISA does not inherently exclude investment advice about plan assets when insurance agents are involved,” the DOL wrote in its June 14 filing.
The DOL argued that the plaintiffs failed to demonstrate the rule would cause irreparable harm or that they were likely to succeed on the merits of their case, and went on to emphasize the rule’s importance in protecting consumers from conflicted advice and ensuring retirement security, asserting that delaying its implementation would undermine these protections.
FACC filed its first lawsuit against the updated fiduciary rule in early May, in which they accused the DOL of violating the Fifth Circuit Court of Appeal’s previous rule that vacated 2016 fiduciary legislation and of hastening the rule’s reviewal process.
Stay tuned…
Reish hosting informational sessions
While it remains to be seen whether the fiduciary rule will withstand the legal challenges, the workplace retirement plan industry continues to prepare for the rule’s September implementation.
One of the ways that is happening is via webinars and Q&A sessions hosted by panels consisting of prominent ERISA attorneys and noted subject matter experts. For example, Fred Reish, Partner at Faegre Drinker, is facilitating monthly meetings for the National Society of Compliance Professionals (NSCP) “DOL Fiduciary Rule Working Group.” For the next monthly meeting, set for Wednesday, July 10, Reish will be joined by DOL Principal Deputy Assistant Secretary Ali Khawar and DOL Deputy Assistant Secretary for Program Operations Timothy D. Hauser.
The DOL has asked to hear directly from NSCP members during the special interactive discussion (exclusively for NSCP members) in order to assist the Department with implementation of the rule.
Reish, along with Faegre Drinker colleagues Joan Neri and Joshua Waldbeser, is also leading a webinar event sponsored by Broadridge this Thursday, June 27 at 2 p.m. EDT, titled, “Navigating the DOL’s Final Fiduciary Rule – Your Questions Answered.”
The panel will look to provide clarity on the rule, focusing on PTE 2020-02, rollover recommendations, IRA transfers, and mitigating conflicts of interest. The targeted webinar is designed to provide actionable insights into the fiduciary standard under ERISA, the Internal Revenue Code, and more.
Registration information is available here.
Reish was recently a guest on the 401(k) Specialist Pod(k)ast, where the spoke about some of the DOL Retirement Security Rule’s key focuses and changes, along with providing implementation information.
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