DOL Fiduciary Rule Status Update for Fraternal Benefit Societies
In papers filed as part of a lawsuit in the U.S. District Court for the District of Minnesota, the Department of Labor (DOL) has stated that they are considering a further delay of the effective date for full implementation of the Fiduciary Rule from January 1, 2018 to July 1, 2019. The DOL also indicated that it is considering lifting restrictions on the types of transactions that are covered by the Fiduciary Rule.
We have seen considerable confusion and challenge in the fraternal system as to what should be done to comply with the Fiduciary Rule and how to prepare for possible full implementation of the rule in the future. The constant changes and delays in the rule have made attempting to prepare for compliance with the rule very difficult. Attorney Shea Doyle of Modern Woodmen spoke for many in the industry at the recent Association of Fraternal Benefit Counsel conference when he said that dealing with the Fiduciary Rule has been like "trying to change the tires on a moving vehicle."
Given this continuing uncertainty we have some recommendations for fraternal benefit societies to consider:
- Identify the portions of your business that are impacted by the Fiduciary Rule
- For business covered by the rule, make sure you are complying with the portion of the Fiduciary Rule that went into effect as of June 9, 2017. Only the "Impartial Conduct Standards" portion of the rule went into effect. Other aspects of the Rule were delayed until January 1, 2018 (and maybe longer). The Impartial Conduct Standards require:
- No false or misleading statements
- Reasonable compensation
- Advice by fraternal agents that is in the best interests of members regardless of the interests of the agent or society
- Consider how you allocate resources to prepare to comply with other aspects of the current version of the Fiduciary Rule that are not in effect. Fraternals do and should continue to put energy and resources into efforts that benefit members by ensuring that products sold are suitable, that members are informed as to the products they are purchasing, and that agents are focused on the best interests of members, regardless of the Fiduciary Rule. Fraternals should carefully consider when and to what degree to allocate resources to build processes to comply with other aspects of the Fiduciary Rule given the continued uncertainty.
- Closely monitor developments and changes as the current January 1, 2018 deadline approaches. As described above, the DOL has indicated that they may push this deadline to July 1, 2019 and may materially change the coverage of the rule. We believe it is likely that there will be changes to the Fiduciary Rule before it finally takes effect. We also believe that it is unlikely that the rule will be repealed altogether.
For more information on the implementation of the Fiduciary Rule and how it affects your business, please contact Todd Martin, Peter Thrane or the Stinson Leonard Street contact with whom you regularly work.