IAA to DOL: Give Advisers More Time to Comply with Fiduciary Exemption
The IAA has asked the DOL to delay compliance with the DOL Fiduciary Exemption until it has completed additional related regulatory action, or for at least six months from the current December 20, 2021 deadline.
The IAA argued in a letter that an extension would give advisers additional time to update their processes and that additional regulatory actions contemplated by the DOL could further complicate compliance.
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Washington Outlook: Seven Initiatives to Watch
The change in Administration is bringing major changes to the regulatory and legislative environment for the investment advisory industry. In the opening session of the 2021 IAA Investment Adviser Compliance Conference – Hot Topics from Inside the Beltway – Rana Wright, Partner, Chief Administrative Officer and General Counsel at Harris Associates, Langston Emerson, Partner at Mindset DC, and Neil Simon, Vice President, Government Relations at the IAA, talked about the initiatives that they expect will lead the revamped agenda. The session was moderated by Karen Barr, President & CEO of the IAA.
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DOL Adopts Rule Amendments to Address ESG Investing
Amendments Drop “ESG” Terms, Update Tie-Breaker Test and Definition of “Pecuniary Factor”
Following almost unanimous opposition, the DOL has adopted amendments to its ERISA investment duties regulation regarding ESG investments that make significant changes to the rule as originally proposed. Despite these changes, however, the preamble to the final rule reiterates the DOL’s concern that ESG investing “raises heightened concerns under ERISA,” and “cautions fiduciaries against too hastily concluding that ESG-themed funds may be selected based on pecuniary factors or are not distinguishable based on pecuniary factors, thereby triggering the tie-breaking provision of…the final rule.”
“We are continuing to review the rulemaking,” IAA General Counsel Gail Bernstein said, “but our preliminary view is that it may, at least temporarily, chill the use of ESG investments in retirement plan portfolios.”
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DOL ERISA Proposals Single Out ESG Investments for Extra Scrutiny
Amendments Would Make It More Difficult to Include ESG Options in Plans
The DOL has proposed amendments to its ERISA investment duties regulation regarding ESG investments. The proposal, according to the related press release, “is designed, in part, to make clear that ERISA plan fiduciaries may not invest in ESG vehicles when they understand an underlying investment strategy of the vehicle is to subordinate return or increase risk for the purpose of non-financial objectives.” Secretary of Labor Eugene Scalia said private employer-sponsored plans “are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan.”
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IRS Extends RMD Rollover Period to August 31, Provides Additional Guidance
The IRS issued a notice on June 23 regarding the CARES Act waiver of 2020 required minimum distributions (RMDs). Under the notice, anyone who already took an RMD in 2020 from certain retirement accounts may roll that money back into a retirement account.
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SEC, CFTC Budgets Increased; SECURE Act Becomes Law
The budgets of both the SEC and CFTC will be significantly increased under the FY 2020 federal spending bill that President Trump has signed into law. The SECURE Act, designed to boost retirement savings, was added to the spending measure.
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