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Regulation

DOL fiduciary rule decision likely to stand, P&I conference speaker says

Michael P. Kreps

While there is still time for the Department of Labor to appeal a March 15 federal appeals court decision that vacated the fiduciary rule, Michael P. Kreps, principal at Groom Law Group, predicted that the DOL will allow the ruling to stand.

To back up his prediction, Mr. Kreps, a keynote speaker at Pensions & Investments' East Coast Defined Contribution Conference in Miami on Tuesday, noted that some DOL officials have been skeptical of the rule since the beginning. Doubt about the future of the rule also came after a 2017 memorandum from President Donald Trump urged the Labor Department to analyze the rule's impact on access to retirement information and financial advice.

The fiduciary rule was partially implemented last year, but key provisions were delayed until July 2019. On March 16, one day after the New Orleans-based 5th U.S. Circuit Court of Appeals' decision, the DOL said it would not enforce the fiduciary rule "pending further review."

Mr. Kreps also acknowledged that while a contrary decision could come out on another outstanding challenge to the rule, it seems "more likely" plaintiffs will withdraw that case given the March 15 decision provided them with the result they wanted.

Mr. Kreps also said there is "a slim chance" that fiduciary rule proponents outside the DOL could intervene, citing challenges such as timing and the fact that courts would have to accept their intervention request. "Courts rarely do that," he said.

"At the end of the day ... that leaves us with the most likely scenario that the fiduciary rule is vacated in its entirety," Mr. Kreps said.

Potentially free from having to focus their time on the fiduciary rule, Mr. Kreps identified areas he thinks the Labor Department and other agencies will turn their attention to instead. Those areas could include guidance around missing participant accounts, lifetime income solutions and electronic disclosures.

"On the retirement side, I think what we're going to see from all of the agencies is a steady move towards a regime that is focused more on upfront compliance and less on back-end enforcement," Mr. Kreps said.

Despite the appellate decision, Mr. Kreps said he did not believe the fiduciary standard issue would go away completely. He predicted it would continue to be a political issue in the 2018 and 2020 elections, noting that some states have been implementing their own fiduciary standards and the Securities and Exchange Commission is also working on its own proposal.