DOL'S FIDUCIARY RULE MAY INCLUDE COMPLIANCE AID PERIOD

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The Department of Labor is “very interested” in finalizing and implementing its proposed fiduciary rule before President Barack Obama leaves office, but it may need to provide a compliance transition period so financial advisers can ease into the new framework, a former DOL official said.

The agency is making “an honest effort” to absorb and internally discuss the comments it's received both in writing and during a marathon hearing, said Allison E. Wielobob, counsel at Sutherland Asbill &  Brennan LLP in Washington. Wielobob came to Sutherland in June after a career at the DOL's Employee Benefits Security Administration. She spoke at an American Law Institute Continuing Legal Education conference Sept. 11 in Washington.

Wielobob said she's heard “cynical” statements from opponents of the proposal that it would be finalized as is. But based on her experience working on other DOL rules, she said, the rule isn't a fait accompli, and changes will be made.

Speaker Says Subregulatory Guidance Likely

Some of them may include providing a “compliance assistance period” to give advisers flexibility in implementing the rule. The proposal would require an eight-month implementation period, but Wielobob said she expects the DOL to issue subregulatory guidance, such as through frequently asked questions and field assistance bulletins.

The disclosure requirements at the heart of the proposal, the best interest contract prohibited transaction exemption, may also get another look, Wielobob said. The DOL already has recognized that the disclosure rules it finalized under 29 C.F.R.§ § 408(b)(2) and 404(a)(5) were a “heavy lift” for plan sponsors. Given that, Wielobob said, she's “hoping that someone smart will figure out a way to mesh these things and make it a little easier to comply with at least the disclosure requirements parts” of the conflict-of-interest rule, she said.

Among the areas that might not change, but that several commenters have requested, is mandatory arbitration. “I don't think that that's going to be eliminated,” she said, although she said DOL officials at the hearings did seem sympathetic to the commenters' concerns.

The DOL's work on the proposal could be hindered if Congress fails to meet its deadline on a federal budget bill, which would result in a government shutdown, Wielobob said.

The House Appropriations Committee approved a measure in June that would cut DOL spending and block a number of related initiatives, such as the proposed conflict-of-interest rule.

Absent a deal or movement on the appropriations bills, Congress probably will have to use a continuing resolution to keep agencies funded when the new fiscal year begins.

Excerpted from a story that ran in Pension & Benefits Daily (09/14/2015).

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