Key Takeaways
- Two Texas Federal District Courts have “stayed” the effective dates of the DOL’s new fiduciary regulation and related exemptions, meaning that the private sector will not have to comply with those rules until the cases are resolved.
- The next step will be for those courts to determine if the regulation and exemptions are valid or should be vacated. After that there will likely be appeals. As a result, the “old” regulation and exemptions will continue to be in effect.
- In addition to the DOL’s guidance, the securities and insurance industry are subject to regulators that focus on their industries. My three prior posts, Fiduciary Rule 42, Fiduciary Rule 43 and Fiduciary Rule 44 discussed SEC and SEC staff guidance about rollover recommendations.
- This post discusses the NAIC Model Regulation #275 for the insurance industry.
The stay of the effective dates of the amended fiduciary regulation and amended exemptions means that the “old” fiduciary regulation (the 5-part test) and the amended exemptions continue in effect indefinitely. As a result, it is unlikely that an insurance producer will be a fiduciary when making a recommendation to a participant to take his or her money out of the plan and roll over into a “qualified” annuity (or, more accurately, an Individual Retirement Annuity). And, if an insurance producer happened to be a fiduciary, the recommendation would need to satisfy ERISA’s prudent person rule and duty of loyalty and the conditions of the existing PTE 84-24, which are much less demanding than PTE 2020-02, which applies to other rollover recommendations.
However, as I said above, it is unlikely that an insurance producer would be a fiduciary. As a result, the standard of conduct would be established by state laws and regulations. By and large, those rules are based on NAIC Model Regulation #275.
