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DOL announces 60-day delay of fiduciary rule

Advisers have until June 9 to adhere to the standards

Posted April 11, 2017

The U.S. Department of Labor (DOL) announced on April 4 a 60-day extension of the applicability dates of the fiduciary rule and related exemptions, including the Best Interest Contract Exemption. The announcement follows a February 3, 2017, presidential memorandum which directed the DOL to examine the fiduciary rule to ensure that it does not adversely affect the ability of Americans to gain access to retirement information and financial advice.

While the rule does not directly impact most employers, they still need to understand their fiduciary obligations, which includes ensuring that any third-party provider agreements do not violate the new restrictions.

Under the terms of the extension, advisers to retirement investors will be treated as fiduciaries and have an obligation to give advice that adheres to “impartial conduct standards” beginning on June 9 rather than on April 10, 2017, as originally scheduled.

These fiduciary standards require advisers to:

  • Adhere to a best interest standard when making investment recommendations,
  • Charge no more than reasonable compensation for their services, and
  • Refrain from making misleading statements.

The DOL has requested comments on the issues raised by the presidential memorandum, and related questions. The department urges commenters to submit data, information, and analyses responsive to the requests, so that it can complete its work pursuant to the memorandum as carefully, thoughtfully, and expeditiously as possible.

In the period between now and January 1, 2018, when all of the exemptions’ conditions are scheduled to become fully applicable, the DOL intends to complete its review under the presidential memorandum and decide whether to make or propose further changes to the fiduciary rule or associated exemptions. In the absence of further action by the department, the delay does not affect the requirement to enter into a Best Interest Contract and other requirements that are currently scheduled for January 1, 2018.

Summary of extensions

The fiduciary definition in the Fiduciary Rule published on April 8, 2016, and impartial conduct standards in these exemptions, are applicable on June 9, while compliance with the remaining conditions in these exemptions, such as requirements to make specific written disclosures and representations of fiduciary compliance in communications with investors, is not required until January 1, 2018.

The relevant applicability dates changed by the DOL are as follows:

  • The applicability date of the final regulation, published on April 8, 2016, is extended for 60 days that defines who is a “fiduciary” under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986.
  • The applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions is extended for 60 days. It requires that fiduciaries relying on these exemptions for covered transactions adhere only to the impartial conduct standards (including the best interest standard), as conditions of the exemptions during the transition period from June 9 through January 1, 2018.
  • The applicability of amendments to Prohibited Transaction Exemption 84-24 (relating to annuities) is delayed until January 1, 2018, other than the impartial conduct standards, which will become applicable on June 9.
  • The applicability dates of amendments to other previously granted exemptions related to fiduciary advice is extended for 60 days.

The extensions were published in the April 7, 2017, edition of the Federal Register and can also be viewed on the Employee Benefits Security Administration’s website, along with associated documents.

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