Advisers have been on pins and needles anticipating a release of the Department of Labor’s sweeping final fiduciary rule governing retirement plan investment advice, and all indications are that they’ll need to wait just a little longer. But it may be much ado about nothing, and in fact, could be a positive sign.
The DOL, along with White House staffers, “are making last-minute tweaks and adjustments to try and put out a rule that will quiet the critics but still achieve their ultimate goals,” notes Tom Clark, Jr., an ERISA attorney with the Wagner Law Group.
Neither the DOL nor the White House would reveal an exact date for releasing the final fiduciary rule, but knowledgeable sources have indicated any delay in the March timetable that was initially envisioned would be tied to further study by the Office of Management and Budget.
Some sources say the rule could come as early as April 4. If the OMB extends its 90-day review period to 120 days, which it can do under a 1993 executive order, then the rule could be released in late May.
“From what I’ve heard, the DOL has basically worked backward on its deadlines,” says Scott Cooley, director of policy research for Morningstar, citing “an eight-month implementation period that will end before Obama leaves office.” This would make it harder for any Republican successor to unwind the rule.
Room for improvement
Labor Secretary Thomas Perez has noted that there could be room for improvement to make the final rule more workable for retirement plan advisers.
Then again, federal regulators will need to be pragmatic in their approach. Since a court challenge is expected, “the DOL probably needs to make some changes to the proposed rule to improve its ability to win in court,” says Cooley.
Whatever the outcome, others suggest there’s no need to perspire in the first place. “With so much speculation about the final rule, it may just be helpful to step back and take a breath before we all find out what is actually in the final rule beyond the conjecture,” says David N. Levine, a principal at Groom Law Group who has written extensively on this topic.
"With so much speculation about the final rule, it may just be helpful to step back and take a breath before we all find out what is actually in the final rule beyond the conjecture."
Barring any major surprise, he admits it will be a significant disruption in the short term, “but as business and compliance strategies evolve, it may mainly serve to reshuffle the chairs in the retirement services industry” over time.
Cooley predicts that “there are likely to be some changes in how the BIC exemption works,” along with some other smaller changes.
Once the final rule is published in the Federal Register, a preamble and compliance instructions will follow.
