News on the DOL Fiduciary Rule & Overtime Regulations
A sea of news continues to come in waves regarding DOL Overtime Regulations and the Fiduciary Rule. To bring you up to speed, here’s a handy recap of where things stand with each.
In early December I wrote an article about the Thanksgiving surprise, in which a Federal court judge issued an injunction preventing the implementation of the Department of Labor’s updated overtime rules that were to go into effect December 1, 2016.
When the injunction was entered, the DOL filed an appeal to the Fifth Circuit Court of Appeals. The states which had brought the challenge filed their response briefs as scheduled. But with the Trump administration coming on board, the government has asked for extensions to file its briefs for the purpose of allowing the new administration’s leadership to review the case and consider the issues. At this point, the government’s deadline is to be extended until May 1.
Does this mean the overtime rule changes will be undone? Perhaps not.
During confirmation hearings, Alexander Acosta, the Trump Administration’s nominee for Secretary of Labor, hinted that he might not favor a total scuttling of the overtime rules. He noted that the overtime rules were last updated in 2004 and that it was unfortunate that sometimes rules that involve dollar values are not updated for a decade or more “because life does get more expensive.”
Acosta also noted that if the original threshold salary figure ($23,660) were to be adjusted for inflation, then the updated number would be about $33,000. The Obama Administration’s rule would have set the figure at $47,476.
It seems possible that if Acosta is confirmed, the new DOL will work to implement some sort of increase, although probably not on the order of the drastic increase under the rules that were to go into effect in December. But it also seems clear that the process for doing so will take time. I will continue to monitor any developments and will provide you an update of any new regulations from the Trump Administration.
DOL Fiduciary Rule:
The DOL’s controversial Fiduciary Rule was originally set to be implemented beginning April 10. With Trump’s election, there has been a good deal of confusion about the ultimate fate of the rule.
Ongoing litigation has so far failed to get the rule thrown out. However, the DOL has now issued a rule delaying implementation of the Fiduciary Rule until June 9, with a transition period for exemptions to run through January 1, 2018. The delay is meant to give DOL time to evaluate the rule in light of issues raised by President Trump with respect to the rule’s effect on the ability of Americans to have access to retirement investments and the effects on costs to retirees to obtain retirement planning and investment services.
What does all this mean? Frankly, it is still too early to tell. Most likely, some form of the Fiduciary Rule will survive, and financial advisors will need to follow through on changes in compensation and advice models to comply.
More important, given the response of many in the industry, it seems that the notion of acting as fiduciaries toward retirement planning clients, at least in concept, is not about to go away.
Stay tuned for more updates in the ever-shifting world of DOL laws, rules & regulations.
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