The U.S. Department of Labor’s Employee Benefits Security Administration has confirmed that “Improving Investment Advice for Worker & Retirees,” an exemption for investment advice fiduciaries, which aligns with the Securities and Exchange Commission’s Regulation Best Interest, will go into effect as scheduled on Feb. 16, 2021.
The Employee Benefits Security Administration said its PTE is “broadly aligned” with Reg BI. In the coming days, the agency will publish related guidance for retirement investors, employee benefit plans and investment advice providers.
“This exemption allows for important investor protections, including a stringent ‘best interest’ standard of care for fiduciary recommendations of rollovers from ERISA-protected retirement accounts,” said Deputy Assistant Secretary of Labor for the Employee Benefits Security Administration Ali Khawar. “We recognize that investment advice providers have been preparing for the exemption, and this step will allow them to implement important system changes. That said, we will continue our stakeholder outreach to determine how we might improve this exemption, the rule defining who is an investment advice fiduciary, and related exemptions to build on this approach.”
The Insured Retirement Institute (IRI) issued the following statement from Chief Legal and Regulatory Affairs Officer Jason Berkowitz in response to the DOL’s decision.
“IRI supports the Labor Department’s decision to allow the exemption to take effect without delay. This will permit our member companies to continue to provide clients with valuable retirement products and services under robust consumer protections that ensure financial advice professionals act in their clients’ best interest. Our members are prepared to undertake the necessary hard work to implement the new exemption, which will require updating policies and procedures, modifying systems, training, and more.
“However, we continue to disagree with the expansive interpretation of the five-part test contained in the rule’s preamble. This interpretation is inconsistent with the 2018 decision by the U.S. 5th Court of Appeals in U.S. Chamber of Commerce v. U.S. Department of Labor. Further, the rule does not provide a clear and workable path to exemptive relief for independent insurance agents.”
IRI said it will continue to work with the DOL to clarify this regulation to ensure that retirement savers have access to their choice of financial advice, products, and services that will help them achieve a financially secure and dignified retirement.
Also reacting to the news was Consumer Federation of America Director of Investor Protection Barbara Roper also reacted to the announcement that the Trump-era exemption would go into effect Tuesday.
“While we did not support the rule’s adoption, we support that decision. While the rule may be better than nothing in the short term, this flawed rule must not be the stopping point for the Department’s efforts to better protect retirement savers from conflicted advice,” Roper said.
The temporary enforcement policy stated in Field Assistance Bulletin 2018-02 will remain in place until Dec. 20, 2021.