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Department of Labor Fiduciary Rule

  

IMPORTANT UPDATE:

Mar. 15, 2018: a federal Appeals Court voided the U.S. Department of Labor Fiduciary Rule in a 2-1 decision.

What to expect:

  • The DOL has not yet indicated whether it would take the case to the Supreme Court or not.
  • It is likely that carriers will provide guidance as a result of 1) the procedures already put in place and 2) the outcome of the appeals court decision.

  • The Securities and Exchange Commission (SEC) has already separately announced that it had taken steps to create a uniform fiduciary standard that would apply industry-wide.

On Apr. 6, 2016, the U.S. Department of Labor (DOL) finalized a rule aimed at addressing conflicts of interest in retirement advice under the Employee Retirement Income Security Act (ERISA). This rule may have significant impact on certain agency operations, requiring a review of existing compensation methods and type of advice provided, and operational decisions to be made before the rule becomes effective. 

Effective date: Phased in

  • Initial compliance begins on Apr. 10, 2017.

  • Full compliance is expected by Jan. 1, 2018.

Resources

The Q&A below explains the anticipated impact of the new rule on agencies

Access the Q&A developed by IIABA (Apr. 2016)

In adition, in order to facilitate the transition, the DOL released its own Q&A in Nov. 2016. The document focuses on the Conflict of Interest Exemptions, and provides information on:

  • How the DOL will address enforcement during the phase-in period (between Apr. 10, 2017 and Jan. 1, 2018),

  • The different types of exemptions, including how agents and brokers can use special procedures to earn commissions, contingent commissions and bonuses that are otherwise prohibited,

  • How agents and brokers can comply with the Best Interest Contract exemptions for financial advice in connection with annuities (both variable and fixed-index), as well as the revised PTE 84-24 in connection with fixed annuities,

  • How marketing organizations can continue to distribute insurance company retirement products through independent insurance agencies.

Access the Conflict of Interest Exemptions FAQ developed by DOL (Nov. 2016)

Regulation

Access the Final Rule

  

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.


 

 

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