Government Affairs Update

October 25, 2021

TOP NEWS

DOL Extends Compliance Period for PTE 2020-02

The Department of Labor (DOL) announced it has granted a request made by IRI and industry partners to provide additional time for compliance with Prohibitive Transaction Exemption (PTE) 2020-02 by extending the their existing non-enforcement policy through January 31, 2022. After that date, and until June 30, 2022, DOL will not pursue prohibited transaction claims with respect to transactions that are eligible for relief under PTE 2020-02 against fiduciaries who do not comply with the rollover-related disclosure and documentation requirements (sections II(b)(3) and II(c)(3)) but are otherwise in compliance with the requirements of that exemption.

Despite the bifurcated approach taken in this new guidance, IRI’s initial analysis is that this does achieve our intended objective in pursuing an extension of the temporary enforcement policy. The extension of the full enforcement policy to January 31, 2022, will allow firms to sync up the distribution of the required fiduciary acknowledgement with their regular disclosure cycles rather than having to an extra mailing for that purpose, and firms will also have the option to align their annual retrospective reviews with the calendar year if so desired. The remainder of the extension will give the industry an additional six months to implement automated compliance solutions to document and disclose the specific reasons why the rollover recommendation is in the client’s best interest. It is important to note, however, that as of February 1, 2022, anyone planning to rely on PTE 2020-02 will have to fully comply with the remaining requirements of the exemption, including the impartial conduct standards, the fiduciary acknowledgement, description of services, and disclosure and management of conflicts.

It is also important to note that the DOL’s enforcement policy does not impact any existing rights that private parties may have to bring their prohibited transaction claims in civil litigation, though some have speculated that courts may be less inclined to find a violation when DOL itself is not seeking to enforce the requirements of the exemption.

Any questions should be referred to Jason Berkowitz

Senate Aging Schedules Retirement Security Hearing

On October 28 at 9:30 a.m. ET, the Senate Special Committee on Aging is slated to hold a hearing entitled “A Financially Secure Future: Building a Stronger Retirement System for All Americans.” According to a media advisory, the members of the Special Committee will be examining existing “gaps in the retirement system and the effects of recent legislative reform.” Presenting expert testimony are:

  • Dr. John Scott, Project Director, Retirement Savings Project, The Pew Charitable Trusts
  • Shai Akabas, Director of Economic Policy, Bipartisan Policy Center
  • Dr. Nari Rhee, Director of Retirement Security Program, University of California at Berkeley Center for Labor Research and Education
  • J. Spencer Williams, Founder, President, and CEO, Retirement Clearing House

IRI will monitor the hearing and will provide an update in the next edition of GAU.

Any questions should be referred to John Jennings.

LEGISLATIVE NEWS

House to Vote on Financial Exploitation Prevention Bill

H.R. 2265, the Financial Exploitation Prevention Act of 2021, is scheduled for a vote by the full House of Representative on October 25. The bill, introduced by Representative Ann Wagner (R-MO), would enhance protections for older and vulnerable retirement savers by increasing the timeframe for the redemption of a security or a fund if a registered open-ended investment company or transfer agent suspects financial exploitation. The bill also directs the Securities and Exchange (SEC) to report to Congress recommendations for legislative and regulatory changes to continue to combat financial exploitation. IRI submitted a letter supporting the Financial Exploitation Prevention Act in April, noting the inclusion of a call for the adoption of enhancements to help safeguard Americans from financial exploitation and fraud in IRI’s 2021 Federal Retirement Security Blueprint.

IRI will monitor the House of Representatives for the vote on H.R. 2265 and will provide an update in the next edition of GAU.

Any questions should be referred to John Jennings.

Financial Service Hearing to Examine Consumer Protection

Director of the Consumer Financial Protection Bureau (CFPB) Rohit Chopra is scheduled to appear before the House Committee on Financial Services on October 27 at 10:00 a.m. ET for a hearing entitled “Bring Consumer Protection Back: A Semi-Annual Review of the Consumer Financial Protection Bureau.” The hearing will explore the findings of the CFPB’s semi-annual report to Congress on “significant problems faced by consumers in shopping for or obtaining consumer financial products or services.” The Committee will also examine recent rulemaking developments at the CFPB, including on mortgage services, debt collection, consumer complaints, and enforcement actions.

IRI will monitor the hearing and provide an update if necessary.

Any questions should be referred to John Jennings.

 

REGULATORY NEWS

Mississippi and Wisconsin Release Best Interest Proposals

Two more states released proposals to adopt the NAIC best interest model regulation this week, bringing the current total to eight pending proposals. First, the Mississippi Insurance Department released its proposed best interest regulation and is seeking comments by November 15, 2021. The proposed regulation closely tracks the NAIC Model, and deviations are mainly non-substantive in nature. The effective date proposed in the regulation is January 1, 2022, but IRI will seek an implementation date of six months after enactment. IRI will also express support for the proposed regulation unless other significant concerns are brought to our attention. Second, the Wisconsin legislature introduced a bill to amend its Suitability in Annuity Transactions statute to align with the NAIC Model. Prior to introduction of the bill, IRI led a joint trade effort to provide comments to the bill sponsors on their initial draft to encourage consistency with the NAIC Model. As a result of these efforts, the introduced bill closely tracks the NAIC Model.

Any questions should be referred to Sarah Wood.

IRI Submits Comment Letter Supporting South Carolina’s Proposed Best Interest Regulation

IRI submitted a comment letter on behalf of its members providing support for South Carolina’s proposed best interest regulation. In its letter, IRI offered comments to pursue alignment with the NAIC Suitability in Annuity Transactions Model Regulation. IRI will continue to monitor for any updates to the proposed regulation and will continue to advocate for consistency with the NAIC Model.

Any questions should be referred to Sarah Wood.