By Jane Meacham, Contributing Editor

The U.S. Labor Secretary on August 9 disclosed in a short court filing that the Department of Labor (DOL) has submitted to the federal Office of Management and Budget (OMB) requests to amend three key aspects of the agency’s fiduciary rule and postpone its applicability to July 1, 2019.

The proposed amendments would delay transition and enforcement of the rule from taking effect on January 1, 2018, which likely will be welcomed by most retirement plan sponsors, asset managers, and service providers, as well as insurance companies that offer annuities.

The proposed amendments would reshape some of the most controversial elements of the fiduciary rule for the retirement plan and investing community. The three comprise the best-interest contract exemption (BICE) and two other prohibited transaction exemptions (PTEs): The Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs and Prohibited Transaction Exemption 84-24 for Certain Transactions Involving Insurance Agents and Brokers, Pension Consultants, Insurance Companies, and Investment Company Principal Underwriters.

Notification about the DOL’s submission on the fiduciary rule amendments to the OMB became publicly available on the OMB website on July 10, ahead of interagency review of the proposal before publication in the Federal Register. The notice alone does not have any legal effect, or guarantee that the transition period will be extended, but a delay in applicability of the fiduciary rule appears likely.

Filed in Thrivent Case

Labor Secretary Alexander Acosta’s disclosure of the OMB filing was made in an administrative action notice filed with the U.S. District Court for the District of Minnesota, which is hearing Thrivent Financial for Lutherans v. Acosta (No. 16-cv-03289-SRN-DTS). The September 2016 case—the sixth lawsuit against the DOL related to its fiduciary rule—doesn’t challenge the rule’s validity. Instead, the nonprofit beneficial society providing financial services and insurance to 2.5 million Christians in the United States is asking the district court for relief from the rule’s BICE that blocks class-action waivers in contracts.

Thrivent claims that the antiarbitration provision illegally violates the Federal Arbitration Act (FAA). But on July 5, the DOL filed notice with the district court that it no longer would defend the antiarbitration provision in the Thrivent case. The district court was scheduled to hear arguments on August 10 about appropriate resolution of the matter.

The fiduciary rule’s impartial conduct standards went into effect on June 9, mandating all advice on qualified retirement accounts to be in a client’s best interest.

OMB Review

The OMB has 60 days to clear the proposal, or it could extend its review of the DOL’s request for an additional 30 days. The OMB’s Office of Information and Regulatory Affairs has to decide whether the DOL has substantial new cause to delay the rule. To make this determination, the OMB will meet with several stakeholders with vested interests in the rule and the changes it would bring.

The agency could decide that the requested delay does not comply with the requirements of the Administrative Procedure Act and reject it, alter its length, or make other substantive changes.