Is an Extension of the Fiduciary Rule Enforcement Date Coming?

Ali Khawar, Acting Assistant Secretary for the DOL’s Employee Benefits Security Administration (EBSA), strongly intimated today that there will be an extension of some kind on the enforcement effective date for Prohibited Transaction Exemption 2020-02.

In remarks made at the ASPPA Annual Conference in National Harbor, MD, Khawar suggested that an announcement would be coming out “shortly,” which likely means the next week or so. While he would not specify the kind of length of extension EBSA is considering, a 60-to-90-day extension seems likely based on the issues Khawar was raising. 

Chief among those issues was concern about software vendors not yet being ready to provide comparative fee information as part of the analysis needed when documenting that a rollover is in a participant’s best interest. 

In December 2020, the DOL under the Trump administration issued PTE 2020-02, which, among other things, permits investment advice fiduciaries to receive compensation in relation to providing fiduciary investment advice, including with respect to advice to rollover a participant’s account in a workplace retirement plan to an IRA and other similar types of rollover recommendations. 

Then, in February 2021, the DOL under the Biden administration announced that it will allow PTE 2020-02 to go into effect as scheduled on Feb. 16, 2021, but that it was implementing a non-enforcement policy until Dec. 20, 2021. Khawar explained at the time that after meeting with numerous stakeholders, the conclusion was reached that they would allow PTE 2020-02 to go into effect, with a “runway” through mid-December to serve as safe harbor enforcement relief. 

The DOL also indicated in its Spring 2021 regulatory agenda that it is considering whether to revisit the fiduciary rule and whether to address the 1975 five-part test and other preexisting exemptions that were not amended by the Trump administration when it implemented PTE 2020-02. The agenda item shows that EBSA plans to issue a Notice of Proposed Rulemaking by December 2021. According to the summary explanation, the amendment will consider the practices of investment advisers and the expectations of plan officials, participants and IRA owners who receive investment advice, as well as developments in the investment marketplace, including in the ways advisers are compensated that can subject advisers to harmful conflicts of interest.