DOL Finalizes 18-Month Fiduciary Rule Delay, Extends Enforcement Policy

December 7, 2017

The Department of Labor (DOL) on Nov. 29 finalized additional delays to major aspects of its fiduciary rule by formally extending, by 18 months, certain transition period deadlines and applicability dates. Consequently, in the absence of further guidance, full compliance with the rule’s chief prohibited transaction exemptions (PTEs) is not required until July 1, 2019. The delay included an 18-month extension of the DOL’s non-enforcement policy for investment advice fiduciaries who are working diligently and in good faith to comply with their fiduciary duties and to meet the conditions of the PTEs.


The fiduciary rule significantly broadens the definition of who is considered a fiduciary under ERISA on account of providing investment advice for a fee. In connection with the rule, the DOL issued new and amended PTEs, which would permit fiduciaries providing investment advice to continue to receive certain forms of compensation and engage in certain transactions without violating applicable prohibited transaction rules. See an earlier WorkCite article discussing the substance of the rule and related PTEs, new and amended.

After much uncertainty and delay, the fiduciary rule went into effect June 9, 2017. Although the new definition of fiduciary investment advice now applies in its entirety, the DOL provided a transition period for most of the substantive requirements of the rule’s new PTEs — the Best Interest Contract (BIC) Exemption (PTE 2016-01) and the Principal Transactions Exemption (PTE 2016-02). It also delayed the applicability of amendments to an existing exemption related to certain insurance and annuity transactions (PTE 84-24). Specifically, it delayed until Jan. 1, 2018, the necessity to fully comply with all of the requirements of the BIC Exemption, the Principal Transactions Exemption and PTE 84-24 (as amended). Instead, during a transition period from June 9, 2017, through Jan. 1, 2018, a fiduciary seeking to qualify for exemptive relief under those PTEs need satisfy only the “impartial conduct standards”:

  • Give prudent advice in the investors’ best interest,
  • Charge no more than reasonable compensation, and
  • Avoid misleading statements.

Lastly, the DOL issued a temporary enforcement policy (FAB 2017-02) covering the transition period of June 9, 2017, to Jan. 1, 2018, during which the DOL will not pursue claims against investment advice fiduciaries who are working diligently and in good faith to comply with their fiduciary duties and to meet the conditions of the PTEs, or otherwise treat those parties as being in violation of their fiduciary duties and not compliant with the PTEs. In Announcement 2017-4, the Internal Revenue Service provided related excise tax relief in connection with the DOL’s enforcement policy.

The Delay

The DOL extended by 18 months (i) the transition period deadlines for the BIC Exemption and Principal Transactions Exemption and (ii) the applicability of the amendments to PTE 84-24. Thus, in the absence of further guidance, full compliance with the rule’s chief PTEs will not be required until July 1, 2019. Additionally, the enforcement policy set forth in FAB 2017-02 is delayed until July 1, 2019. Finally, the DOL confirmed that the excise tax relief provided in IRS guidance is similarly extended.

What’s Next

While the main reasons for implementing the delay involved the desire to avoid unnecessary compliance costs and investor confusion, several of the DOL’s cited reasons for the delay hint at what’s next for the fiduciary rule and its PTEs:

  • The delay will provide enough time for the DOL to complete its re-examination of the rule as required by the president’s Feb. 3, 2017, memorandum, as well as a review of responses the DOL received regarding the multiple comment requests in 2017.
  • Despite the ongoing re-examination and comment review, the DOL anticipates it will propose a new streamlined class exemption “in the near future.”
  • In developing any new proposals or changes, the DOL intends to coordinate with other agencies, including the Securities and Exchange Commission, the Financial Industry Regulatory Authority and the National Association of Insurance Commissioners.

McGuireWoods’ employee benefits team will provide WorkCite updates on any new developments related to the rule and the PTEs.

For further information, please contact either of the authors of this article — Robert B. Wynne and Maria P. Rasmussen — or any other member of the McGuireWoods employee benefits team.