Sheri A. Creger, CPFA  Ι  August 11, 2017

On August 9^th, 2017, the Department of Labor submitted a proposal to the Office of Management and Budget (OMB) to delay the January 1, 2018, applicability date for certain exemptions to the fiduciary rule until July 1, 2019.  The 18 month delay would apply to phase two which includes the best interest contract exemption (BICE), principal transactions exemption, and the prohibited transaction exemption 84-24 (or PTE 84-24 which covers compensation paid in the insurance and securities brokerage context.)

Currently, these exemptions (BICE, Principal Transactions, and PTE 84-24) are in effect but generally require only compliance with the “impartial conduct standards” during the Transition Period, which began on June 9, 2017.

The first phase of the fiduciary rule which went into effect June 9, expanded the definition of who is a fiduciary as well as established the impartial-conduct standards.  But full compliance with the new rule was not required until January 1, 2018.  Without the latest delay, the BICE will be required to sell fixed, indexed and variable annuities beginning January 1, 2018.  Opponents of the rule are concerned with the phase two rules that would establish a class-action right to sue.

The DOL’s intention to delay the full implementation date of the fiduciary rule was revealed in a court filing in the Minnesota case brought against the DOL by Thrivent Financial.  The DOL’s filing didn’t provide details about the delay, but it did say that the full proposal was expected to be published in the Federal Register by the OMB on August 10, 2017, which, barring any complications, makes the delay official.

By Sheri A. Creger, CPFA  Ι  August 2, 2017

The deadline of October 1st to start a new Safe Harbor 401(k) Plan for 2017 is fast approaching!

For the right company, a Safe Harbor 401(k) Plan offers real advantages over a traditional 401(k) plan.   Safe Harbor Plans make it possible for owners and highly-compensated employees (HCEs) to make the maximum salary deferral contributions to the plan even if other employees make limited or no contributions.  Equally important, by including a Safe Harbor provision, the plan avoids the possibility of corrective taxable refunds that might otherwise be required due to a compliance testing failure.

Why do you need to act quickly?  An Employer who would benefit by starting a new Safe Harbor 401(k) Plan in 2017 needs their plan to be fully operational by October 1, 2017.  This “operational by October 1st” deadline is necessary in order to satisfy the “safe harbor” condition on this type of qualified retirement plan which requires that employees are allowed at least 3 months to make salary deferral contributions.

While the IRS deadline for starting a Safe Harbor 401(k) Plan is October 1st, setting up a new 401(k) plan can take at least a month or more.  So the practical deadline is actually closer to mid-August.  If you are interested in establishing this type of plan for 2017, we encourage you to act now to enable your assembled team to have enough time to get it completed for you.