The Office of Management and Budget approved on Monday the18-month delay for the more onerous provisionsof the Labor Department's fiduciary rule.

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The OMB approval, which usually takes 90 days, took lessthan a month.

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The office listed its action as "Consistent with Change," whichmeans OMB "had to make some changes as a result of the review, butnot with the length of the extension because the title is thesame," says Fred Reish, partner in Drinker Biddle & Reath'semployee benefits and executive compensation practice group in LosAngeles. OMB likely had to "make changes to the economic analysisand maybe the length of the comment period."

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The delay must now be finalized by Labor.

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Steve Saxon, partner at Groom Law Group, said that with the OMBreview finalized, Labor will now release a proposed rule in theFederal Register with a comment period of no longer than 30days.“We do expect the delay to go through,” Saxon toldThinkAdvisor on Tuesday.

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“We think [Labor is] going to propose the extension and do avery short comment period and then approve it.”

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And firms are waiting eagerly for that approval.“People needconfirmation that the delay will go through so they can hold off onthe buildout of their systems and software and the like, which isvery expensive," Saxon said. "They don’t want to do that if thereare going to be changes to the rule … recordkeepers and otherretirement service providers are desperate for confirming of thedelay.”

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Labor Secretary Alexander Acosta told a Minnesota court onAug. 9 that Labor had filed with OMB to delay theapplicability date on three of the rule’s exemptions from Jan. 1,2018 to July 1, 2019.

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Labor proposed amendments to three exemptions, which were allapproved by OMB:

  • The best-interest contract exemption, which opponents of therule argued is the contract that would spark a slew of class-actionlawsuits;

  • Class exemption for principal transactions in certain assetsbetween investment advice fiduciaries and employee benefit plansand IRAs; and

  • Prohibited Transaction Exemption 84-24 for certaintransactions involving insurance agents and brokers, pensionconsultants, insurance companies, and investment company principalunderwriters.

"DOL is cognizant that the industry needs certainty on whetherthe deferred requirements will commence on Jan. 1,"said George Michael Gerstein, a lawyer with StradleyRonon, a law firm in Washington that helps financial firms dealwith regulators, in an email. "At this point, clarity isparamount."

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Melanie Waddell

Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2023. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.