Everyone worried about full implementation of the Fiduciary Rule can now forget about it happening on Jan. 1, 2018. The new target date is July 1, 2019 – a full 18 months later.
The Department of Labor indicated Wednesday it has submitted a proposal to the Office of Management and Budget (OMB) to delay implementation of the remaining parts of the Fiduciary Rule for the additional 18 months.
It was in an Aug. 9 filing in the Thrivent Financial for Lutherans case in Minnesota federal district court where the DOL notified the Court it had submitted the proposed extension to the OMB of the transition period and delay of the applicability dates from Jan. 1, 2018 to July 1, 2019 for the Best Interest Contract (BIC) Exemption and Prohibited Transaction Exemption (PTE) 84-24. The extension would also apply to PTE 2016-02, which is a class exemption for principal transactions in certain asset classes.
“The effect of this development means that fixed indexed annuities will continue to be allowed to be sold under PTE 84-24 for at least this extended transition period, rather than being placed under the wholly unworkable Best Interest Contract Exemption on January 1, 2018,” said Chip Anderson, Executive Director of the National Association for Fixed Annuities (NAFA).
Notice of the DOL’s submission to the OMB will become publicly available on the morning of August 10, triggering interagency review in preparation for publication in the Federal Register.
While the rule took partial effect on June 9, expanding fiduciary duties to advisors and agents and implementing the Impartial Conduct Standards, many in the insurance and financial industry have been far more vocal in their opposition to the phase two components of the rule: the BIC Exemption, PTE 84-24 and PTE 2016-02.
Without the new 18-month delay, the BIC Exemption would have been required to sell fixed indexed and variable annuities as of the end of this year.
NAFA had submitted a comment letter earlier this week in response to the DOL’s July 6 “request for information” that outlined recommended revisions to the rule and the PTEs. Specifically, the NAFA letter provided rationale for expanding the scope of PTE 84-24 to cover fixed indexed annuities as well as fixed rate annuities.
NAFA argues that the decision to move fixed indexed annuities under the BIC Exemption reflects a fundamental misunderstanding by the Department regarding the features and mechanics of this particular type of fixed annuity. The letter further sought to clarify the real-world effects of such a decision, which NAFA said would include “decimating companies throughout the fixed annuity distribution system” while limiting access to crucial retirement savings options and the related personal retirement financial services Americans need to retire well.
“Since the release of the fiduciary rule in its final form, we have consistently advocated for the uniform treatment of all fixed annuity products by moving fixed indexed annuities back under PTE 84-24,” NAFA’s Anderson said. “This critical change is essential to protecting both our NAFA members, who represent all arms of fixed annuity distribution, as well as the millions of consumers who want and need a way to generate predictable income they cannot outlive in retirement. We hope that, as part of the Department’s efforts to review and revise the rule as necessary ‘to empower Americans to make their own financial decisions’ and adequately save for lifetime expenses, our recommendation will finally be followed.”
News of this 18-month delay brings new light to that hope, as phase two components of the rule could surely see changes before July of 2019.
One rumored possibility is the DOL will use the delay to work with the SEC on creating a uniform fiduciary standard that would apply to brokers and advisors across the board instead of only advisors working in the retirement space.
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