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Aon Retirement and Investment Blog

DOL will NOT Enforce New Fiduciary Rule

Our blog titled The DOL Fiduciary Rule…Delayed Again, But Which Provisions? indicated that the U.S. Department of Labor (DOL) officially delayed full implementation of the controversial Fiduciary Rule. The result was a delay in the requirements that investment advisors to plan fiduciary committees, participants of ERISA covered retirement plans and Individual Retirement Account (IRA) owners ensure their compliance with the impartial conduct standards by providing their clients with certain disclosures, warranties, and contract provisions, and by adopting sufficient compliance policies and procedures.

A significant shift in momentum occurred on March 15, 2018 when the U.S. Court of Appeals for the Fifth Circuit, in a divided ruling, struck down the Fiduciary Rule due to its findings that the DOL overstepped its regulatory authority by redefining an investment advice fiduciary under ERISA.  The Court held, among other things, that the reinterpretation of a fiduciary unreasonably expanded such status to parties appropriately regulated by the Securities and Exchange Commission (SEC).

While this occurred in the Fifth Circuit, the impact is nationwide. The entire Fiduciary Rule was invalidated “in toto”; the result is that neither the impartial conduct standards rule nor the procedures and disclosures rule as put forth by the DOL under the Obama administration are in force at this time. The DOL was quoted in an article published March 16, 2018 by Bloomberg Law, as saying “Pending further review, the Department will not be enforcing the 2016 Fiduciary Rule.”

At this time, it is uncertain as to whether the DOL will appeal the ruling, or redraft its most recent version of the Fiduciary Rule. The SEC announced on March 19, 2018 that it intends to further its less onerous advisory compliance model. While many financial industry/brokerage organizations have expressed interest in the SEC’s model, Chris Carosa of Fiduciary  News has commented that the SEC as an enforcer of impartial conduct standards is really no different than the DOL, basically another “adult that can’t be on the playground at all times.” While the Fifth Circuit’s ruling is in place now, there have been different rulings have been issued on this topic in other circuit courts. This split among circuits begs the question as to whether this matter may go before the Supreme Court.

This news does not impact our relationships with clients of Aon Hewitt Investment Consulting or Aon Retirement Plan Advisors, both of which have historically served as fiduciaries under ERISA with respect to investment advice provided. A significant impact to retirement plans is at the participant level in that decisions made by participants with respect to their own accounts (such as to rollover their account to an IRA) may or may not create a fiduciary relationship with the service provider’s recommendation.

Bridget Steinhart is an Associate Partner in AHIC’s DC Plan Consulting team who leads AHIC’s Qualified Fiduciary Consulting team and is based in St. Louis, MO.

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs. Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.

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