IRA

Fiduciary Day Is Here to Stay

June 26, 2017
By: Chin Kim

On May 22, after much fanfare about the possibility for additional delays to the DOL Fiduciary Rule, the new Secretary of Labor (Alexander Acosta) and his team finally announced their decision.

The June 9 "applicability date" will remain intact. What does this mean?

It was like waiting for college acceptance letters all over again. Did I get in or did I not? As my oldest son has been anxiously waiting for the next chapter of his academic career, I was waiting for the DOL to decide about what June 9 will mean to the retirement industry.

On May 22, after much fanfare about the possibility for additional delays to the DOL Fiduciary Rule, the new Secretary of Labor (Alexander Acosta) and his team finally announced their decision.

The June 9 "applicability date" will remain intact.
 

What Does This Mean?

If you recall, last April the DOL released the final regulation defining who will be an "investment advice" fiduciary by updating the old five-part test that has been in place since 1975. Effective June 9, if a recommendation is made for a fee to clients with retirement assets (e.g., IRAs, qualified plans), it will be deemed as fiduciary advice.

On the same date, the Best Interest Contract (BIC) Exemption and other revised exemptions are available to fiduciary advisors. Nevertheless, the DOL is adopting a phased implementation of the rule and exemptions.


Related Article:
How Prepared Are Advisors for the Fiduciary Rule?
 

Phased Implementation Defined

Below are the requirements and expectations to comply with the new rule and exemptions.

Transition Period
(6/9/17 to 12/31/17)
Full Compliance
(1/1/18 and Onwards)

Fiduciaries relying on exemptions (e.g., BIC Exemption, PTE 84-24) only have to adhere to the Impartial Conduct Standards (ICS) that requires them to:

(a) Act in a client's best interest.
(b) Charge no more than reasonable compensation.
(c) Avoid misleading statements about investment transactions, compensation, and conflicts of interest.

Not required to implement during this period: notices or disclosures, BIC Exemption contracts, warranties of policies and procedures, etc.

Unless the DOL concludes that changes to the rule and exemptions are necessary or that it needs more time to complete its review, full compliance with all the conditions of the exemptions will be required for firms and advisors.

DOL's Actions during 2017

During the transition period, the DOL will be focusing on the following matters:

  • Continue analyzing the rule and exemptions – based on the president's Memorandum dated February 3, 2017
  • Release Request for Information – the DOL will solicit feedback for possible regulatory changes to the rule and exemptions, and whether or not additional delay should apply to the transition period
  • Expects firms to adopt policies and procedures – to help advisors comply with impartial conduct standards
  • Assist with compliance – work with the industry to comply rather than citing violations and imposing penalties

Feeling Overwhelmed by the DOL Fiduciary Rule? We have created a number of resources to assist you when working with your clients to meet their retirement goals.

For additional questions, please contact the Retirement Strategies Group at (800)722-2333, ext. 3939, or e-mail us at RSG@PacificLife.com.

Picture of Chin Kim

Chin is currently an Assistant Vice President of Regulatory Compliance in the Retirement Solutions Division at Pacific Life. Previously, he led the Retirement Strategies Group, as Assistant Vice President in the Retirement Solutions Division at Pacific Life. His core responsibilities included sharing and supporting retirement strategies concepts through development of marketing materials and tools and leading the team members in the field and in the home office.

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