As the fiduciary rule (and the Best Interest Contract Exemption) expires, regulatory agencies are reportedly ready with a fix, albeit a temporary one, for commission-based advisors offering retirement plan advice.
The Labor Department and Internal Revenue Service will clarify that brokers can continue to earn commissions when offering mutual funds and other savings products, according to Politico Pro, which cited three sources familiar with the matter. The relief is expected to be temporary and lead to a proposed rule later this year, the report said, citing those sources.
The relief follows a March 15 decision by the 5th Circuit Court of Appeals to vacate the so-called fiduciary rule. While that decision has the effect of eliminating the new requirements of the fiduciary rule which went into effect earlier this year, it also does away with the BIC, which provided a means for advisors to provide advice as an ERISA fiduciary and still receive commissions, also known as “conflicted” advice, in that it varied based on the advisor’s recommendation.
Politico Pro notes that the DOL and IRS relief ensures that brokers will face no enforcement if they are fiduciaries while earning commissions.
On April 26, even before the April 30 deadline for the Labor Department to appeal the court’s decision came and went, AARP decided to step in. The same day, three states – California, New York and Oregon – filed two separate motions: one to intervene in the March 15 decision that vacated the fiduciary rule “in toto,” and the other to obtain an “en banc” review of that 2-1 decision by the entire court.
Those motions were, however, dismissed last week.
Technically, the Labor Department still has a window to appeal to the U.S. Supreme Court – but the issuance of the guidance suggests that’s unlikely.
