The Department of Labor announced an extension that will prohibit enforcement of the new fiduciary ruling until the end of January, 2022.
This ruling comes after pressure on the DOL by trade associations and industry lobbyists. Those urging for a delay cited not enough time for financial firms to prepare and transition to compliant practices - particularly smaller RIA firms who lack the resources to do so quickly.
The “Improving Investment Advice for Workers & Retirees” regulation was established during the Trump administration, but became effective on Feb. 16, 2021 under the Biden administration. The original compliance date of Dec. 20, 2021 has officially been extended to Jan. 31, 2022.
The DOL cited the “practical difficulties for financial institutions” in its reasoning for delaying enforcement. Acting Assistant Secretary of Labor for Employee Benefits Security Ali Khawar said, “Based on concerns raised, we’ve concluded that providing additional transition relief for financial institutions that are working in good faith to build systems to comply with the exemption conditions is appropriate.”
According to the DOL, this ERISA exemption is for fiduciaries who provide investment advice to those utilizing individual retirement accounts or ERISA-covered pension plans. These professionals, under new ruling, are allowed to receive partial third-party compensation when recommending investment products, as long as they follow a set number of impartial conduct standards that reflect fiduciary practices.
One of those standards includes a five-part test, which advisors can use to determine their fiduciary obligation when working with clients under different circumstances.
