DOL Secretary: Best Interest Standard Will Be Enforced Against “Willful” Violators

Labor Secretary Alexander Acosta testified before the Committee on Education and the Workforce on Wednesday to discuss the Department of Labor’s policies and priorities, including the status of its fiduciary rule.

Acosta explained to Rep. Phil Roe (R-TN) that the fiduciary rule’s best interest standard went into effect in June 2017, but that there is a notice of proposed rulemaking pending at the Office of Management and Budget to extend the remaining provisions for 18 months until July 1, 2019.

The DOL officially filed a rule with the OMB earlier this month, and if the rule is approved by the OMB, the agency will return it the DOL to make it public.

The DOL is proposing to extend the applicability dates of three exemptions, including the best interest contract exemption (PTE 2016-01); the class exemption for principal transactions (PTE 2016-02); and the prohibited transaction exemption involving insurance agents and brokers (PTE 84-24).

“The best interest standard is now in effect, but other parts are not in effect,” said Rep. Robert Scott (D-VA) to Secretary Acosta. “What would happen when a retiree has their best interests violated and is essentially ripped off? What are the remedies?”

Acosta responded that, “As long as companies are proceeding in good faith to implement the best interest standard, we are in a compliance assistance mode, but if companies are not proceeding in good faith, we still have enforcement authority. If there are willful violations we do have enforcement authority.”

“Does an individual have any individual remedy?” pressed Rep. Scott.

“Congressman, the enforcement authority within ERISA is a federal enforcement authority, not an individual enforcement authority,” Acosta responded.

The fiduciary rule expands the definition of investment advice fiduciary and is currently under review as ordered by President Trump. Labor Secretary Alexander Acosta and SEC Chairman Jay Clayton have pledged to worked together on a uniform standard of the rule.

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