FACC Supports Temporary Enforcement Policy Extension

FACC submits letter to DOL reinforcing its support for the request being made by financial services industry trade organizations that the Department of Labor (DOL) extend the temporary enforcement policy as provided for in Field Assistance Bulletin (FAB) 2018-02 which is presently scheduled to expire on December 20, 2021.

FACC adds a separate request that DOL ultimately allow the current rules and PTEs to go into effect without further substantive change in order to give industry a chance to operate under these new rules without distraction or burden of dealing with constantly changing rules and requirements.  

Via email: Khawar.Ali@dol.gov 

The Honorable Ali S. Khawar 
Acting Assistant Secretary 
Employee Benefits Security Administration 
200 Constitution Ave, NW 
Washington, DC 20210 

Dear Acting Assistant Secretary Khawar: 

We wish to reinforce our support for the request being made by financial services industry trade organizations that the Department of Labor (DOL) extend the temporary enforcement policy as provided for in Field Assistance Bulletin (FAB) 2018-02 which is presently scheduled to expire on December 20, 2021. 

We support in particular the request made by the Chamber of Commerce in its letter dated September 2, 2021 and the letter submitted by a group of trade associations dated September 21, 2021. In both letters, there is a request to extend FAB 2018-02 beyond December 20, 2021 by at least six to twelve months. There is also a separate request that DOL ultimately allow the current rules and PTEs to go into effect without further substantive change in order to give industry a chance to operate under these new rules without distraction or burden of dealing with constantly changing rules and requirements. We were a signatory to the joint trade group letter but wish to further explain our reasons that are more specific to the insurance industry. 

First, we believe it is imperative that DOL extend the TEP at least six to twelve months, or if further rulemaking is contemplated by DOL, then until a reasonable period after any additional rules or PTE modifications are finalized. It is our view there remains considerable confusion across the financial services industry as a result of DOL’s continuing indications that more guidance is forthcoming and the PTEs may undergo yet another round of changes. This has been especially unsettling for the insurance industry which remains uncertain when agents must be considered fiduciaries and must seek to comply with PTE 2020-02 or PTE 84-24, to the extent applicable, when the rules remain in flux and open to interpretation. 

Second, we hope DOL will ultimately determine that existing PTEs established through rulemaking earlier this year should be left in place and allowed to operate without further substantive changes that would add to industry compliance burdens. We agree with the perspective provided in the joint trade group letter that a reasonable timeout would allow interested parties time to observe and evaluate the real-world effectiveness of the existing PTEs. From the viewpoint of the insurance industry, this is especially important because most insurers and agents are trying to adjust to new state insurance requirements at the same time

DOL is implementing its requirements for tax-qualified annuity products. It is our sense these challenges are significantly compounded by an ongoing pandemic presenting agents with unique business obstacles and making it difficult for compliance departments to work together in an ordinary office environment on complex compliance projects. The insurance industry would benefit from a period of stability right now during which it could upgrade compliance procedures in an orderly manner to accommodate NAIC requirements and PTE requirements coming on-line at the same time.

We wish to stress the insurance industry in general does not necessarily face the same issues as the securities industry which is seeking more time to come into compliance with particular elements of PTE 2020-02. That is because many insurance carriers selling annuities may instead be relying on agents to meet requirements of PTE 84-24 to the extent applicable. It must be recognized, however, that this is partly because PTE 2020-02 does not fit well with independent distribution systems which unto itself continues to be a major contributing factor to the confusion around these rules and PTEs. It is another reason the TEP should be extended so, once DOL is finished with its rulemaking and guidance, industry will have the necessary time and be able to expend the right resources to comply with established and workable rules. 

Finally, we feel it is necessary to reserve our rights to challenge existing or any new rules promulgated by DOL. As is evident from the 2018 Fifth Circuit decision, there are serious issues surrounding DOL’s authority, among other things, relative to the definition of fiduciary, PTE requirements, and regulation of IRAs. While we believe under present circumstances DOL should leave the existing PTEs in place for reasons explained above, we still question the validity of agency guidance – for example – attempting to expand the definition of fiduciary and extend ERISA to employer plan rollovers into IRAs. We continue to assess how DOL rulemaking comports with the Fifth Circuit decision and thus we must fully reserve all rights. Anything stated in our letters to DOL, in an attempt to offer our views about these ongoing issues, should not be taken as admissions in any way. 

Thank you for your attention to these matters. 

Sincerely,
Kim O’Brien
CEO, Federation of Americans for Consumer Choice

cc: Honorable Martin J. Walsh, Secretary, US Department of Labor

Attachments:
Chamber of Commerce Letter 
Joint Trade Group Letter 

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