ARA Backs Tiered Approach to Full BIC Applicability Date
The American Retirement Association, parent organization of ASPPA, has weighed in
on extending the special transition period under the Best Interest Contract Exemption (and related exemptions).
Consistent with its earlier comments
, the comment letter directed to the Labor Department supports a tiered approach to determine the applicability date for the delayed provisions of the Best Interest Contract Exemption, the Principal Transaction Exemption, and amendments to PTE 84-24 (the Delayed Guidance), noting that that approach would reduce unnecessary costs and burdens that could otherwise limit the availability of financial advice to America’s investors.
Under this “tiered” approach, the Delayed Guidance would become applicable as of the later of July 1, 2019, or a date which is at least 18 months from the date a revised exemption (or rule) is put forth by the Labor Department.Request for Comments
On Aug. 31, 2017, the department published a proposal
to extend the transition period an additional 18 months until July 1, 2019, and asked for comment on the same, as well as comments on if it might be beneficial to consider a tiered approach as compared to a time certain deadline.
That notice had explained that the primary purpose of these proposed amendments
is “to give the Department of Labor the time necessary to consider possible changes and alternatives to these exemptions.” The notice further explained that the Labor Department is “particularly concerned that, without a delay in the applicability dates, regulated parties may incur undue expense to comply with conditions or requirements that it ultimately determines to revise or repeal.”Tiered Timing
The ARA letter acknowledges that the Labor Department’s review will take time and the proposal acknowledges that implementation of any new alternative exemptions or other changes to the Fiduciary Regulation by the current Jan. 1, 2018, applicability date would not be realistic, and affirmed its support for a tiered approach. Moreover, the ARA letter notes that “…it will take some time to give thoughtful consideration to the comments that have already been submitted (with more sure to follow),” and that it would be difficult to say with certainty when this process will conclude. “For this reason, it would be better to have the tiered approach so that an extension is ‘built-in’ without the need for further rulemaking,” the letter says.
In addition, ARA explains that tying the “event” in the tiered approach to the date when a revised exemption (or rule) is put forth “will give financial institutions and advisers the assurance that there will be sufficient time to update compliance systems when the rules are final,” concluding that an 18-month period would “allow for an orderly and cost effective process to implement any changes that may be made to the Fiduciary Regulation or related exemptions.”
The ARA also strongly recommended that the Labor Department continue the temporary enforcement policy announced in Field Assistance Bulletin 2017-02, both because it would be consistent with the Labor Department’s announced intention to assist (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions, and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions.
Moreover, the letter states that if a Financial Institution were to act in bad faith, “…the Department could pursue enforcement action. While the review is ongoing, the temporary enforcement policy strikes the proper balance,” the letter says.