By Anne Sherry, J.D.
Calling the Department of Labor’s original 12-month implementation period for its fiduciary rule an “unrealistic deadline,” the Chamber of Commerce supported the agency’s proposal to delay applicability for 60 days and urged the DOL to tack on another year. The pool of advisers willing to work with smaller retirement investors is already shrinking, the chamber submits, and this situation will worsen as more advisers announce their compliance plans.
The DOL’s proposal would delay the fiduciary rule’s applicability date by 60 days, until June 9, to facilitate a review of the rule directed by a presidential memorandum. The DOL also issued a non-enforcement policy to cover the gap between the current applicability date (April 10) and such time as a delay is issued, as well as a 30-day cure period should no delay be issued. The chamber asked the department to work with Treasury on a non-enforcement policy regarding IRAs.
The complexity of the fiduciary rule and uncertainty about what compliance entails are already increasing costs and reducing access to investment advice, the chamber writes. In the 10 months since the final regulation was published, new information and real-world compliance experience have become available to the department. It should take this information into account as part of its review.
The chamber also focuses on the Best Interest Contract Exemption. This is the only way transactions involving fixed index annuities can get around a prohibition on commissions, and it is only available to banks, registered investment advisers, insurance carriers, and broker-dealers. This directly harms retirement savers, who will be unable to receive advice and some investment products from their insurance agents.
The DOL erred by assuming in its cost-benefit analysis that no saver would lose access to expert investment advice, the chamber continues. In 2011, the department estimated as part of a rulemaking that improved access to investment advice would yield benefits of between $7 billion and $18 billion annually. Conversely, the chamber argues, the department could have estimated the monetary cost to savers who may lose access to advice as a result of the fiduciary rule. The opportunity to correct this error, which may have led to a wrong rulemaking decision, is ample reason to postpone the rule’s applicability date. The chamber submits that the DOL also erred by presuming that the full benefits of the rule would begin to accrue immediately and continue to accrue uniformly.