Earlier today, the U.S. Department of Labor (DOL) proposed amending the fiduciary rule—a federal regulation that tightens conflict of interest rules under the Employee Retirement Income Security Act. The rule requires insurance agents and brokers who give guidance about certain retirement investments to adhere to a fiduciary standard of care.

The proposal seeks to establish a class exemption for independent marketing organizations (IMOs) that meet certain requirements. Currently, IMOs must individually apply to be considered a financial institution. A class exemption would ease this compliance burden for IMOs and therefore help them avail themselves of the rule’s Best Interest Contract Exemption—which would mean independent insurance agents who distribute certain annuities through IMOs could potentially still earn commissions.

The proposed modification to accommodate IMOs spans 220 pages and involves a 30-day comment period. Big “I” staff is reviewing the proposal to determine the full extent of its possible impact on members and will comment accordingly.

Last week, the DOL also issued additional guidance on the fiduciary rule that includes information specifically for insurance agents. The new FAQ document addresses which types of communication regarding retirement accounts are considered fiduciary in nature. It also provides additional guidance on what is considered investment education and is therefore not fiduciary in nature. Remember, the DOL  issued an FAQ document for consumers and a separate FAQ document for advisers in October 2016.

Of note, the fourth question in the new adviser FAQ document relates specifically to insurance agents. It assigns fiduciary status to an agent who recommends IRA distributions be used to fund a permanent life insurance product and who receives a commission on the product, because a recommendation regarding how IRA proceeds should be invested has occurred.

The IMO exemption and FAQ documents arrive amid anticipation that the incoming Trump Administration and Congress will seek to amend or even reverse the rule before its April implementation date. The U.S. House of Representatives has already introduced legislation to delay implementation of the rule until 2019. The Big "I" will continue advocating for adjustments to the rule with Congress and the new Administration. 

Jennifer Webb is Big “I” federal government affairs counsel.