Trump to halt fiduciary rule

[Tom Poje]

this just popped up on MSN

http://www.msn.com/en-us/money/markets/trump-to-halt-obama-fiduciary-rule-order-review-of-dodd-frank/ar-AAmzOmM?li=BBnb7Kz&ocid=iehp

[GMK]

As expected, I think.

As I finish out my last day as an employee and plan administrator, I think it would be cool if elected officials had fiduciary responsibilities ... like that would ever happen. (Probably should have put that comment in humor.)

[My 2 cents]

So who will watch out for the innumerate and uninformed investors (oh, all those 401(k) participants!)?  Don't they deserve protection from the wolves?  But in the grand scheme of things (such as removal of limitations on dumping industrial waste into streams and rivers), aren't there bigger things to worry about?

[jpod]

My 2 cents:  You should pose your question to those employees who have been sold variable annuities and similar products with their 401k or pension rollover money.

[RatherBeGolfing]

A halt to rule is not a big deal in my opinion.  It does not mean the rule is gone.  It means they are going to review it.  We can all speculate on the reasons why it is delayed, but the truth is the Obama DOL didn't give them much of a choice.  We were supposed to get several big pieces of guidance on the rule from the DOL prior to the implementation date.  We were expecting this guidance in 4 key areas.  The DOL delivered last minute (about 3 months later than were were expecting) guidance that covered less than half of what we were promised guidance on.  I firmly believe we will have a rule, but it may be tweaked in some areas.

In order to implement, we need more guidance, a delay was unavoidable. 

 

[Lou S.]

1 hour ago, RatherBeGolfing said:

A halt to rule is not a big deal in my opinion.  It does not mean the rule is gone.  It means they are going to review it.

 

Perhaps you missed Trumps eliminate 2 regulations for every new 1 memo. I'd be shocked if the Fiduciary rule gets any traction in the next 4 years.

[RatherBeGolfing]

7 minutes ago, Lou S. said:

Perhaps you missed Trumps eliminate 2 regulations for every new 1 memo. I'd be shocked if the Fiduciary rule gets any traction in the next 4 years.

I doubt this is one that will be eliminated.  But by all means read whatever into the halt you wish.  Delays and revisions happen all the time, so do eliminations.  Obama scrapped the fiduciary rule the GWB admin had on the table and waited 7 years to roll out a new one. 

All I'm saying is it is a delay, not elimination.  They can't eliminate it right away even if they wanted to since the DOL made the rule effective last year (gee I wonder why they did that) with an implementation date for this year.  That means they will need to jump through hoops to kill it and I don't see them doing it.  Revisions, yes, elimination no.  I know as much as anyone else so I could be wrong.

For the record, I'm in favor of the rule.  There are some sections I would tweak and there are certainly sections that even the DOL don't know how to practically enforce (that is why we need guidance), but I think it is a good rule in general. That said, all they have announced is a delay to review, so all the speculation about them killing the rule because of XYZ is premature at best.

[Lou S.]

You could be correct. I just don't see our new Labor Secretary putting this one high on the priority list in allocating department resources to work on it nor do I see this Administration seeing a need to "finish it" any time soon.

I think this is likely to to come well after any Tax Reform plans this congress is going to be working on and well after any ACA replacement plan that gets worked on as well.

And for what it is worth like you I too am in favor of the rule but I'm not going to hold my breath expecting it to be done anytime in the near future.

 

 

[RatherBeGolfing]

I'm optimistic.  

DC is a tricky place.  As much as I study procedure and rules for "fun", it is impossible to really figure out unless you work with it on a daily basis.  After talking to people who are lot smarter than me, my understanding is that they can't simply say we don't like it and put it on the shelf indefinitely.  There are limits to how they can delay it and for how long without going through certain procedures.  That would include issuing proposed revisions open for public comment and so on. This is why we had the effective date of 2016 and implementation date of 2017.  If it would have had an effective date of April 2017, they could simply put in the recycling bin and move on.

 

[ESOP Guy]

Like so many rules in this field is there a need to work on fees and so forth?  Ok, you can get me to agree to that idea.

On the other hand all the other regulations on this topic have either done no good or hurt things in my opinion.  I mean we have notice after notice about fees now being mandated.  Who reads all that silly stuff as it tends to be too long.  It is like prospectuses when buying a mutual fund.  Great idea until you get a several hundred page book stuffed with language only a lawyer would care for and I think I know plenty of lawyers who would deny they care of it.  

Can anyone explain to me how anyone has benefited from the new Sch C disclosures and all the "how many angels can dance on the head of a pin" discussions of direct vs indirect fees/income?  As far as I can tell all this had done is drive up people's cost to send out notices and prepare Form 5500s and has shed no light at all on fees.  Either people knew about them already or they now have vague discussion of indirect fees in notices.  Although when those rules first came out it was a boon for people who sell CE classes to TPAs as people tried to explain that mess to people. 

It really did seem to me these rules could have hurt the middle class by simply making the risk of giving advice to anyone without a large balance not worth it.  You couldn't generate enough fees to cover the related risk.  The government is terrible at making rules that balance cost/benefit. 

[shERPA]

+1 ESOP Guy.  The presumed solution every time has been more notices and more rules.  Frankly most people aren't that interested in reading all that stuff, let alone understanding it.  I attended employee meetings with a few clients where a big package of 404a5 stuff was distributed.  Most of it was found in the trash can by the door after the meeting.  I've sat in 401(k) plan sales meetings where a veritable tome of contract and disclosure documents is presented to the client, they flip to the back page and sign.  Why?  They trust the people they are dealing with.  Is this trust misplaced?  Certainly in some cases it is, in many cases it is not.

Should financial advisers work in the best interests of their clients?  Absolutely.

Should rules purporting to ensure they do so be so complex and costly that advisers cannot afford to service clients with modest accounts?   No.

Complicated rules drive cost into the system at every level, these costs are ultimately borne by the participants, reducing their ultimate retirement benefits.  And it's particularly ironic to have DOL and politicians ranting and raving about excessive costs and then "solve" the problem by raising costs of running a plan.  Both hard costs and risk. 

I don't know the "right" answer, but I keep thinking there has to be a better, simpler principles-based approach.   

Will this delay and review really change the approach?  Not holding my breath.  As ESOP Guy says:  " The government is terrible at making rules that balance cost/benefit."

[shERPA]

Apparently the final memo drops the specific 180 day delay and leaves it to DOL to determine if a delay is appropriate?  If this is true it is sort of the worst of all worlds, introducing more uncertainty only 60 days out. 

[RatherBeGolfing]

26 minutes ago, shERPA said:

Apparently the final memo drops the specific 180 day delay and leaves it to DOL to determine if a delay is appropriate?  If this is true it is sort of the worst of all worlds, introducing more uncertainty only 60 days out. 

Yes and no.  (I think) It would be impossible to comply with the memo and keep the April 10 implementation date. It removes the specific 180 day delay.  Unless they have new superpowers at the DOL, they will issue some sort of delay.  They have to comply with the Presidents directive AND give us guidance, it aint happening in 60 days...

[Peter Gulia]

Without wading into the public-policy discussion, here's a practical point some practitioners might consider.

Even if the applicability date of the 2016 investment-advice fiduciary rule somehow becomes delayed, this might not delay the availability date of the Best Interest Contract Exemption.

An investment or service provider that is (or might be) an investment-advice fiduciary under the 1975 rule might want to use the new exemption to exempt a prohibited transaction that might be impractical or more difficult to exempt under other exemptions.

[RatherBeGolfing]

2 hours ago, Fiduciary Guidance Counsel said:

Without wading into the public-policy discussion, here's a practical point some practitioners might consider.

Even if the applicability date of the 2016 investment-advice fiduciary rule somehow becomes delayed, this might not delay the availability date of the Best Interest Contract Exemption.

An investment or service provider that is (or might be) an investment-advice fiduciary under the 1975 rule might want to use the new exemption to exempt a prohibited transaction that might be impractical or more difficult to exempt under other exemptions.

That is an interesting point.  Is that because its a separate class exemption not necessarily tied to the rule?  Are there any other "companions" to the rule that may not be impacted by the delay?

[Peter Gulia]

Each of the rule, each prohibited-transaction exemption, and each amendment of a previously published exemption is an administrative-law act, each of which could be changed.

For BenefitsLink readers following this topic, here's a link to the President's memo as published in this morning's Federal Register.

https://www.federalregister.gov/documents/2017/02/07/2017-02656/fiduciary-duty-rule

 

 

[Peter Gulia]

Federal court upholds investment-advice fiduciary rule.

 

The 2016 investment-advice fiduciary rule wins; the challengers lose.  The U.S. District Court for the Northern District of Texas acted in a case that consolidated three civil actions challenging the investment-advice fiduciary rule.  (Challenges in other districts’ courts have been unsuccessful.)

 

Chief Judge Barbara M. G. Lynn found that recent executive actions (the President’s memo and the acting Secretary of Labor’s news release), which plaintiffs’ attorney Eugene Scalia had yesterday brought to the court’s attention, “do not moot this dispute.”  Today, attorneys of the Justice department asked the court to stay its proceedings until March 10.  Filing her 81-page opinion and order, Judge Lynn denied that request.

 

Deciding the case, Chief Judge Lynn denied all challenges, and granted the Labor department’s request to uphold the 2016:

1. investment-advice fiduciary rule;

2. amendment of Prohibited Transaction Exemption 84-24; and

3. Best Interest Contract Exemption.

If you want to read the full story, I attach the court’s opinion.

 

 

Chamber of Commerce v Hugler opinion.pdf

[RatherBeGolfing]

Short but detailed summary of the arguments and the ruling