The rule is likely on a clock driven by the presidential election, ERISA lawyer Brad Campbell said.
The Labor Department’s revised fiduicary rule proposal will likely be finalized this year, with a Jan. 1, 2025, effective date, according to ERISA attorneys.
During their Inside the Beltway webcast Thursday, Fred Reish and Brad Campbell, partners at Faegre Drinker, agreed that Labor will likely file its revised fiduciary plan with the Office of Management and Budget for review likely by May — with a final rule released by Labor sometime this summer.
That timeline “seems to be driven, in part, by the elections,” Campbell said. The current administration “is going to want this rule in place by Jan. 1 so that regardless who wins, it’s an issue that’s already taken effect.”
Two of the most controversial sections of the rule continue to be the “definition of a single recommendation as fiduciary advice, and the impact [of the rule] on independent insurance agents,” Reish stated.
The comment period on Labor’s plan ended Jan. 2. Labor has been busy reviewing more than 19,000 comments.
Campbell, a former head of Labor’s Employee Benefits Security Administration, stated on the webcast Labor’s plan is ”extremely controversial.”
Labor is “trying to move this regulation along very quickly,” Campbell said.
Congressional Interest
“There is a lot of controversy and a lot of congressional interest in the rule,” Campbell continued.
“There’s an effort in Congress to add a rider to the appropriations bill to say that there wouldn’t be any funding for the initiative until GAO [conducted] a new study of its [the fiduciary rule’s] effects,” Campbell relayed.
Labor is working on a final rule, having received comments, Campbell added.
“The indications that we’ve gotten is that we don’t really get to know what they do until they do it, … they [DOL] are considering some modifications but probably not necessarily significant modifications,” Campbell opined.
‘Giant Regulatory Change’
The rule “affects different segments of financial services differently,” Campbell said.
RIAs, for instance, “have been using [PTE] 2020-02 as it currently stands in connection with their securities fiduciary recommendations when they deal with rollovers, for a while,” Campbell explained.
However, “independent insurance producers who are recommending life insurance product with an investment component, they’ve never in their lives thought about the Department of Labor in connection with that state regulated insurance sales transaction,” Campbell continued.
Labor’s rule “converts that state insurance sales transaction of life insurance with an investment component into ERISA fiduciary advice to the extent the money used to purchase that policy comes from a plan, IRA or distribution from a plan or IRA, or a rollover or a transfer,” Campbell relayed.
“So you’re looking at just a giant regulatory change for … that kind of insurance producer.”