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Client Alert

Presidential Memorandum Directs the DOL to Re-Examine Fiduciary Rule
Authors: Susan P. Serota, Christine L. Richardson, Colleen Lamarre

2/7/2017

On February 3, 2017, President Trump issued a Presidential Memorandum to the Secretary of Labor directing the Department of Labor (DOL) to re-examine the “Fiduciary” rule. The DOL’s Fiduciary rule expands the definition of “fiduciary” under Section 3(21) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), for individuals and entities that provide investment advice for a fee to individual retirement account owners, health savings account holders, ERISA-covered plans and their participants and beneficiaries (https://www.whitehouse.gov/the-press-office/2017/02/03/presidential-memorandum-fiduciary-duty-rule)

The Presidential Memorandum directs the DOL to prepare an “updated economic and legal analysis” examining whether the Fiduciary rule may adversely affect the ability of Americans to gain access to retirement information and financial advice. Specifically, such analysis should consider whether the Fiduciary rule may (1) reduce access to retirement savings products and investment advice; (2) cause dislocations and disruptions in the retirement services industry that may adversely affect investors; or (3) increase litigation or increase the cost of access to retirement savings services and advice. If the DOL determines that the Fiduciary rule will likely cause any of these undesirable outcomes or that the rule is inconsistent with the administration’s stated priorities of empowering Americans to make their own financial decisions and to facilitate their ability to save for retirement, the DOL is directed to propose a rule rescinding or revising the rule.

The Fiduciary rule is scheduled to begin to take effect on April 10, 2017. The Presidential Memorandum does not automatically delay application of the rule, however. The Acting Secretary of Labor responded to President Trump’s Presidential Memorandum by issuing a statement on February 3, 2017 that the DOL “will now consider its legal options to delay the applicability date as [it complies] with the President’s memorandum.”

The future of the Fiduciary rule is uncertain. Lawsuits against the DOL challenging the implementation of the rule have been brought in federal district courts in Texas, Washington and Kansas. A ruling is expected shortly in the Texas case. In addition, Congress may introduce legislation that could significantly alter the rule. Service providers, financial institutions, and plan sponsors and fiduciaries impacted by the rule have already taken substantial steps to comply with the new requirements. Accordingly, regardless of whether the courts, Congress or the DOL take action to delay the effective date of the Fiduciary rule, providers may continue to implement newly-adopted procedures and service models with respect to retirement (and related forms of) investment advice.

The DOL is expected to issue additional guidance in the near future. We will continue to monitor the situation and provide an update as it becomes available. For further information about the rule, including information about conflicts of interest and the best interests contract exemption or BICE, please see our Summer 2016 issue of Perspectives.

Download: Presidential Memorandum Directs the DOL to Re-Examine Fiduciary Rule

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