Trade Groups Say 60-Day Comment Period Is Not Enough for the Fiduciary Rule

Industry associations write to the DOL arguing that the new proposal is too long and complicated for just a 60-day comment period.

Stakeholders in the retirement, insurance and investment industries published an open letter to the DOL, Wednesday, calling on the department to double the comment period for a new fiduciary rule proposal from 60 days to 120.

The DOL’s proposed amendments, announced last week, would apply fiduciary status to advisers making rollover recommendations and to insurance agents making annuity sales using retirement assets, both of which are often one-time transactions.

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The comment period for the proposal runs from November 3 through January 2, 2024. As the letter notes, this takes the period through multiple federal holidays and, according to the trade groups, leaves only 39 business days to file comments with the department.

The DOL also announced there would be a public hearing to discuss the proposal approximately 45 days after its publication in the Federal Register, or around December 18. The letter notes that this would require stakeholders who would like to testify to prepare their comments in even less time.

The industry letter also points out that previous iterations of the proposal, in 2010 and 2016, had 90-day comment periods with extensions.

Alexander Ryan, a partner in Willkie Farr & Gallagher LLP, says the DOL “is concerned about the notion that financial service professionals are evading ERISA [Employee Retirement Income Security Act] fiduciary status by taking the position that they are not giving advice to retirement investors on a regular basis.”

The proposal reframes “regular basis” and “relationship of trust and confidence,” key elements of a fiduciary relationship, as regular one-time recommendations made to investors in general, that is, “in the ordinary course of the firm’s business,” Ryan explains.

In the trade groups’ request for a longer comment period, the firms note the sweeping and complicated changes the proposal would bring.

The regulators are looking to swap the current five-part test defining whether an adviser is acting as a fiduciary with a three-part test. In the amended rules, a recommendation would trigger fiduciary status if the financial professional: has discretionary authority over retirement assets; identifies himself as a fiduciary; or renders paid advice on a regular basis to retirement investors when that advice can be relied on as the primary basis of an investment decision concerning retirement assets.

The proposal would also update PTE 84-24, which allows insurance agents to receive a commission for the sale of annuities to retirement investors. Ryan says the DOL was worried that this exemption was “too easy to comply with and isn’t sufficiently protective of retirement plan investors.” Further, the proposal would bring requirements from PTE 2020-02 into 84-24, so insurance agents have the same standards of care when making annuity sales that fiduciary advisers do.

The letter is signed by 18 stakeholders including the Insured Retirement Institute, the SPARK [Society of Professional Asset Managers and Record Keepers] Institute, the ERISA Industry Committee, the American Council of Life Insurers, the ESOP [Employee Stock Ownership Plan] Association and the American Benefits Council.

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