OMB Reviewing Request to Delay Fiduciary Rule Deadline
February 28, 2017 by Frank Klimko,
WASHINGTON – The U.S. Office of Management and Budget is reviewing an interim rule that would delay the implementation deadline of the new fiduciary mandates set to be imposed by the U.S. Department of Labor beginning on April 10.
The OMB received a request for the delay on Feb. 9, but has yet to publish the content of any proposed rule. The DOL made the request for a delay in response to memorandum from President Trump to review and possibly rescind the rule (Best’s News Service, Feb. 7, 2017).
The OMB now is considering how to proceed with a delay rule, attorney Erin M. Sweeney, a member with Miller & Chevalier in Washington, D.C., told Best’s News Service.
“They won’t rescind the rule with what they are filing now,” Sweeney said. “They will have to go through another process. The only thing they are asking for is a delay at this point.”
No time-frame has been published for release of the content of the proposed OMB rule. It could come out as early as next week, Sweeney said.
The initial compliance deadline is in April, with a final deadline of Jan. 1, 2018, and industry groups are hoping that the OMB action will provide for a six-month delay. Because finalized rules, like the fiduciary rule, have a body of evidence and precedent behind them, the new administration must demonstrate the evidence is incorrect before a rule can be rescinded, Sweeney said.
And, the courts have ruled that agencies have an obligation to enforce finalized rules, she said.
The DOL will use the delay period to establish a record to rescind the rule, Sweeney said. Gathering enough evidence in that short period of time won’t be easy.
“It will be a full-on sprint to get a record put together,” she said. “It will be very, very hard. You just have this very complicated rule.”
The new rule, which changes how retirement advisers conduct business, aims to ensure that any transaction is in the best interest of the client. And, except for special circumstances, it generally moves such transactions away from commission-based compensation.
“That central argument is that as long as you are compensated by insurers, and are not taking all your commission from a fee, then you inherently don’t have your client’s best interest at heart,” said Joel Wood, senior vice president of government affairs for the Council of Insurance Agents & Brokers. “It all goes back to the big battle over compensation and it is just a big bonanza for the trial bar.”
“We very strongly support a delay and would be very surprised if they don’t maintain their momentum in getting rid of it,” Wood told Best’s News Service.
In a related effort to keep up the pressure for a delay, the Americans for Annuity Protection on Feb. 23 launched a ‘repeal and replace’ social media campaign. They asked members to post messages critical of the rule on President Trump’s FaceBook page and Twitter account.
“Repeal and Replace the DOL rule!” a sample message said. “The rule doesn’t help consumers save! As written it is a complete mess and no amount of tweaking will help.”
However, the rule continues to have its supporters.
Kathleen M. McBride, past chairwoman for the Committee for the Fiduciary Standard, said the committee does not endorse a delay.
“No delay, no obstruction,” McBride told Best’s News Service. “We met with OMB last week. Insurance companies that want a delay are working directly against the interests of American retirement investors.”
“We oppose any delay and in fact as the courts have stated, there is no reason to delay; delay would not be in the public interest,” McBride said.
Last week, Judge Daniel D. Crabtree, of the U.S. District Court for the District of Kansas, granted a summary judgment against the rule in a case brought by Market Synergy, an insurance agency licensed in Kansas. Last year, he refused to issue a preliminary injunction and the latest action makes that decision final (Best’s News Service, Nov. 29, 2016).
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
