Only in Washington! The DOL rule to delay its own fiduciary rule set to go into effect on April 10, 2017 which was submitted to the (Office of Management Budget) OMB has been delayed. Classified as not “not economically significant” when submitted, the OMB, which concluded its review February 28, classified the rule as “economically significant” sending it back to the DOL and also labeled it as a “major rule” which could further delay the delay. Meanwhile the 401k industry, especially broker dealers, their advisors and the record keepers that support them, are waiting on pins and needles wondering whether they will have to implement fundamental changes to the they conduct business.
The timeline for the DOL delay rule was tight anyway with the Groom Law Group speculating that the OMB would have to release the rule by February 24 even assuming a short 14 day window for comments. The “economically significant” label creates further delays as the DOL will be forced to conduct an economic analysis. Perhaps even worse, the “major rule” label requires a 60 day window between when the rule is published and takes effect making delay of the April 10 deadline effectively impossible.
The DOL could issue an interim final rule to overcome the 60 day requirement but must show “good cause” which experts say is difficult at best. Recall that the DOL’s first attempts to implement the fiduciary rule in 2010 were thwarted because it did not follow proper procedures which resulted in significant delays.
Not waiting, Empower-Retirement sent a note to clients and advisors that it does not intend to be a plan fiduciary even if the DOL rule goes into effect as planned – a prominent ERISA attorney classified them as outliers. Most broker dealers and RIAs whose advisors are most affected by the rule are ready to implement changes but are reluctant to even announce them not knowing the effective date. Other braver distributors are not ready hoping that the rule will be delayed.
So what do 401k and 403b plan sponsors think? Not much, it turns out, according to a soon to be released survey with plan sponsors by TPSU and NAPA. Only 4% of defined contribution plan sponsors indicated that the DOL fiduciary rule would force a change – 46% said that they would do nothing while 30% were not sure. Another 20% indicated that the rule would affect them but no changes would be needed.
