DOL Confirms Fiduciary Rule Rewrite, Other Agency Priorities

The recently released Spring 2021 Regulatory Agenda by the Ministry of Labor confirms that a rewrite of fiduciary rules is underway and provides other key information for the ministry’s regulatory plans for the coming months.

Overhaul of the fiduciary rule

The 10-year saga of the fiduciary rule will continue. As various Biden administration officials have suggested in recent months, DOL’s Spring 2021 Regulatory Program confirms that the Employee Benefits Security Administration (EBSA) plans to issue a Notice of Proposed Regulatory Proposal (NPRM) on the definition of fiduciary. The DOL agenda item shows that EBSA plans to release the NPRM by December 2021.

According to the summary explanation, the amendment will take into account the practices of investment advisers and the expectations of plan officials, members and owners of the IRA who receive investment advice, as well as the evolution of the investment market. investment, including arrangements for remunerating advisers who may be subject to harmful conflict of interest advisers.

Along with this regulation, notes the agenda item, EBSA will assess the exemptions available for the prohibited transaction categories and consider proposing modifications or new exemptions to ensure consistent protection of employee benefit plans. IRA employees and investors.

While many industry players believed the Biden administration would immediately end the Trump administration’s Prohibited Transaction Exemption (PTE) for investment advisory trustees, Biden officials at EBSA have confirmed in February that the department would allow the PTE to go into effect as scheduled on February 16, 2021.

As EBSA Acting Deputy Secretary Ali Khawar noted in April, after conducting a review and meeting with various stakeholders, the DOL concluded that it would be better to allow the entry into force of the PTE 2020-02, the current period serving as a “trail” before people really need to be in full compliance. Khawar also noted that the extension of the Temporary Enforcement Policy in FAB 2018-02 would remain in effect until December 20, 2021, to allow the parties a transition period.

At the same time, he indicated that the work of the ministry was not finished. While the unified agenda does not provide more detail, it does provide the most formal marker that further changes are underway. And because the proposal will be released as an NPRM, it will allow for a formal public comment period.

Additional DOL priorities

  • Climate and ESG risks. Regarding President Biden’s executive order on “climate-related financial risks,” DOL said EBSA will undertake a review of regulations regarding “financial factors in the selection of regime investments” and “bonds”. Trustees Regarding Proxy Voting and Shareholder Rights ”. This was widely expected and already hinted at when the DOL announced in March that it would not apply the final rules released under the Trump administration.
  • Form 5500. The objective of this project is under article 202 of the SECURE law, which requires the implementation of a consolidated annual report for certain groups of similar plans no later than January 1, 2022, which should apply to Form 5500 annual report / reports for the plan years starting after December 31, 2021. The unified agenda shows that the DOL plans to publish an NPRM by June 2021.
  • Lifetime income illustrations. While a provisional final rule was published in September 2020, the unified agenda shows that the DOL plans to publish a final rule by July 2021. The final rule would reflect the changes made to article 203 of the SECURE law to add an illustration of life income to the pension. benefit statements provided to participants in certain defined contribution plans.
  • Voluntary fiduciary correction program. According to the explanation, EBSA plans to amend and reformulate its AVC, which was initially adopted in 2002 and revised in 2005 and 2006. The changes will expand the scope of some transactions currently eligible for correction and streamline correction procedures. for some others. EBSA announces that it will publish a rewording of the VFCP in its entirety and seek public comment. EBSA also plans to propose an amendment to the related exemption relating to the category of prohibited transactions. The agenda shows that EBSA plans to publish an interim final rule by September 2021.
  • Abandoned plan program. Following a review of the agency’s priorities, EBSA says it is returning an entry to its biannual regulatory program that aims to allow bankruptcy trustees to use the ministry’s abandoned plan program to end and liquidate the plans of sponsors in liquidation under Chapter 7 of the Bankruptcy Code. EBSA removed this entry from the biannual regulatory program in September 2019 due to the redefinition of the agency’s priorities. The updated agenda now shows that the DOL plans to issue an interim final rule by November 2021.

It is important to note that the dates listed in the Semi-Annual Regulatory Program are target publication dates and are subject to change.

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