After Donald Trump's election victory, many are wondering what to expect with respect to the Department of Labor's recently adopted fiduciary rule, which governs investment advice related to retirement plan assets.
It is no secret that Mr. Trump intends to take aim at many existing regulations (although the federal courts seem to be doing some of his work for him, as in the recent decisions with respect to the DOL's persuader rules and overtime regulations).
In one town hall meeting in New Hampshire prior to the election, Mr. Trump remarked that as many as 70% of federal regulations would be on the chopping block if he were elected. A Trump adviser, in whose view the DOL fiduciary rule “could be the dumbest decision to come out of the U.S. government in the last 50 to 60 years,” has stated that the Trump administration would, in fact, repeal the regulation.
Nonetheless, my view is that it would be an imprudent decision to cease or even slow down compliance efforts with the DOL fiduciary rule.
While timing may not be everything, in this instance it is an important consideration in three separate respects.
• First, the business environment in January 2017 will not be the same as it was in 2010, when the DOL first issued its proposed regulations. At that time, there was a hue and cry from all sectors of the business community against the proposed fiduciary regulations. Today, while there are still significant portions of the business community that oppose it, as evidenced by the number of lawsuits brought to challenge all or certain parts of the regulation, the affected parties, while not all-in on every aspect of the regulation, believe they can at least live with it and, of more importance, have already devoted significant time and resources to compliance efforts.
• Second, the Obama administration, concerned that a Republican Congress and president could overturn the regulation, made sure the final DOL rule was issued more than 60 legislative days before Mr. Trump's inauguration so that use of an expedited legislative procedure to overturn the regulation under the Congressional Review Act is no longer an option. Of course, Mr. Trump could go to Congress and request that it repeal the fiduciary rule. However, without a filibuster-proof majority in the Senate (60 votes necessary, and the Republicans only have 52), the likelihood of that occurring is a long shot.
• Third, the new rule becomes generally effective on April 10, 2017, less than 90 days after Mr. Trump is inaugurated. Even if the repeal of the DOL fiduciary rule were high on Mr. Trump's priority list, which, at least based on the lack of his specific comments it does not appear to be, the ability of the president to undo existing regulations is very limited (particularly those that have already been published in the Federal Register, as the DOL fiduciary regulation was).
Unlike executive orders issued by President Obama, which Mr. Trump will be able to rescind immediately upon attaining office, he cannot do that with regulations. Further, because of the manner in which the DOL fiduciary rule is structured, advising the DOL not to enforce the new regulation will be of limited utility, because the primary method of enforcement of the DOL fiduciary regulation will come from private lawsuits.
At best, it seems that Mr. Trump might be able to delay the applicable effective date (an action that has been requested of the Obama administration, in light of the numerous actions that need to be taken to fully comply with the new regulation) and begin the formal process of repealing the rule. If that were to occur, it will not likely take place in the first 100 days of the Trump presidency.
In light of all this, continuing to prepare for full compliance with the regulation is both reasonable and prudent.
Marcia S. Wagner is the managing and founding partner of The Wagner Law Group. She specializes in ERISA and employee benefits.