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DOL Fiduciary News: July 25, 2017

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DOL opponents want to push implementation back until 2019

InvestmentNews; July 24, 2017 @ 2:03 pm

Critics of the DOL fiduciary rule are urging the Labor Department to delay its implementation until January 2019 — or possibly longer.

"To provide needed certainty, reduce harm to investors and limit unnecessary 'sunk' costs associated with implementing requirements that the department ultimately eliminates or modifies, the department should immediately — by August 15, 2017 — issue an interim final rule delaying the January 1, 2018, applicability date to January 1, 2019," Investment Company Institute acting general counsel Dorothy Donohue and deputy general counsel David Abbey wrote in a comment letter last week.

The U.S. Chamber of Commerce went a step further in its comment letter and called for the transition period for the regulation to be extended until June 30, 2019, "or a later date if needed by the department."

The DOL rule, which requires financial advisers to act in the best interests of their clients in retirement accounts, was partially implemented in June. Two provisions became applicable then — one that expanded the definition of fiduciary to include brokers, who now operate under the suitability standard, and one that implemented impartial conduct standards for advisers.

Economic Policy Institute Says Fiduciary Rule Delay Could Cost Retirement Savers 

PLANSPONSOR.COM | July 24, 2017

Delaying the Department of Labor’s (DOL’s) fiduciary rule any further will cost retirement plan savers $7.3 billion over the next 30 years, the Economic Policy Institute maintains. Delays that the Trump administration has already instituted will already cost retirement plan savers $7.6 billion over the next 30 years, according to the Institute.

“Any delay will be enormously expensive to retirement savers—and not just during the period of the delay,” says Economic Policy Institute Policy Director Heidi Shierholz. “The losses that retirement savers experience from being steered toward higher-cost investment products during the delay would not be recovered and would continue to compound. The only beneficiary of President Trump’s move to delay this rule is the financial services industry, which wants to continue to take advantage of retirement savers for as long as possible.” 

DC Industry Providers Voice Fiduciary Rule Frustration

PLANSPONSOR.COM | July 24, 2017

Friday July 21st marked 15 days since the publication of a Department of Labor (DOL) request for information pertaining to its ongoing expansion and strengthening of the fiduciary standard under the Employee Retirement Income Security Act (ERISA).

Galling some industry providers, the first portion of the RFI only allowed for a 15-day comment period. The short comment period, as laid out in the text of the RFI, applied to Question 1, relating strictly to the idea of delaying the January 1, 2018, applicability date of certain provisions of the expanded fiduciary rule.

The agency’s wider RFI seeks input regarding potential new and amended administrative class exemptions from the prohibited transaction provisions of ERISA and the revenue code that were published in conjunction with the fiduciary rule expansion. Commentary on these matters is due within 30 days—on or before August 7, 2017. Among other considerations, the DOL seems to be curious how recent product development of “clean shares” and zero-revenue sharing investment approaches may impact the fiduciary landscape.

DOL fiduciary rule causing DC-plan record keepers to change business with insurance agents

InvestmentNews; July 24, 2017 @ 3:19 pm

Independent insurance agents have been among the most affected by the Department of Labor's fiduciary rule, and it appears some defined-contribution-plan record keepers have been contributing to that upheaval.

Record keepers such as Principal Financial Group have told independent agents who sell or service retirement plans, and who are not licensed with a broker-dealer or registered investment adviser, that they can't receive compensation after January without changing their business model, in the name of compliance with the regulation.

As of July 1, Principal is only accepting new sales of group variable annuities — a type of DC-plan funding vehicle — that are made as a securities-licensed adviser of a broker-dealer or RIA, or if agents "have a non-fiduciary (education only) fee-for-service arrangement directly with the plan sponsor," according to a company memo reviewed by InvestmentNews.

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