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Department of Labor Issues First Wave of FAQs to Explain Fiduciary Rule

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October 31, 2016

Client Alert
As anticipated, on October 27, 2016, the Department of Labor (the “DOL”) issued its first wave of FAQs to address certain questions that have arisen with respect to the DOL’s previously issued fiduciary rule (the “Rule”). Generally, the Rule broadly defines who is a fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code and provides that parties providing fiduciary investment advice to plan sponsors, plan participant, and IRA owners are not permitted to receive payments that create conflicts of interest without complying with protective conditions in a prohibited transaction exemption. The FAQs mostly address questions under the DOL’s recently issued and/or amended prohibited transaction exemptions. The FAQs include no surprises or reversals to the previously published exemptions. Finally, the FAQs do not answer the questions that many product manufacturers and wholesalers have regarding the Rule.

Although there has been speculation that the DOL may delay the Rule’s April 10, 2017 applicability date, the FAQs indicate that the DOL believes that such date is appropriate and provides adequate time for plans and financial services providers to adjust to the change from non-fiduciary to fiduciary status. Note that the Best Interest Contract Exemption (the “BIC Exemption”) and Principal Transactions Exemption have a phased implementation that extends to January 1, 2018.

The DOL indicated that although it has broad authority to investigate and audit plans and plan fiduciaries, compliance assistance is a high priority. Its general approach to implementation of the Rule will be to emphasize assistance to plans, plan fiduciaries, and financial institutions who are working diligently and in good faith to understand and come into compliance with the new Rule and Exemptions.

The following are some of the highlights included in the FAQs:

View Relevant Document(s):