Department Of Labor Fiduciary Rule Update: Best Interest Standard Delay

By Bill Kauffman, Vice President, Financial Solutions

  • Originally published January 15, 2018, last updated January 15, 2018
  • Annuity, DOL

It’s official. The Office of Management and Budget (OMB) and the Department of Labor (DOL) have agreed to delay the Best Interest Standard until July 1, 2019.

What Does This Mean?
The DOL Fiduciary Rule has not been withdrawn. It has been delayed. Until then, we recommend that insurance only producers and advisors continue to operate as you have since June 9 of this year.

All annuity sales that involve qualified funds, (IRA and 401k rollovers, RMDs and Roth conversions) fall under the current Prohibited Transaction Exemption rule (PTE 84-24). You will continue to use the PTE 84-24 Disclosure statement provided by the various carriers.

What Are the Requirements?
Agents and advisors will need to comply with the Impartial Conduct Standards and the disclosure requirements that meet PTE 84-24 and the exemption. Any agent or advisor claiming the PTE 84-24 exemption is the fiduciary on the transaction and it is up to the individual agent or advisor to document that the Impartial Conduct Standard has been met.

Impartial Conduct Standards:

  • Give advice that is in the best interest of the client.
  • Charge no more than reasonable compensation.
  • Make no misleading statements about the transactions, compensation and conflicts of interest.

What Steps Do You Need to Take?
In order to comply with these requirements, agents and advisors are required to take the following steps when the source of funds is a qualified account.

  • Obtain a client signed PTE 84-24 Disclosure statement.
  • Fill in your commission as a percentage of the gross premium which can be obtained through the insurance carrier or Senior Market Sales. Most of our carriers are providing a form.
  • Have your client sign it and give a copy to your client.
  • Keep a copy in your client file.
  • You are not required to send the form to the carrier or SMS.

You will also want to keep completed fact finders or detailed notes from client interviews with your product recommendations and why you made them. As a fiduciary, it’s imperative to maintain client meeting notes that document the client’s financial situation, and how the recommendation meets the client’s goals. Here are some suggestions:

  • Keep a copy in your client file.
  • Do not send a copy to the carrier or to SMS.
  • Retain copies of illustrations and comparisons used in the transaction.
  • Keep all of the carrier required forms. This can include those that use producer attestations on them.
  • Only use approved marketing materials.
  • Retain documents for the life of the annuity or life insurance contract.
  • Submit your business through the current SMS process.

Please note, some carriers have indicated that they will be spot checking to make sure the PTE 84-24 Disclosure statement has been completed and kept.

Do you have questions about how the DOL Fiduciary Rule affects your business? SMS marketing consultants are equipped with answers on how to operate in this new regulatory environment. Call a consultant today – 1-877-645-4939.