Eaton Vance
November 15, 2016
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A word on DOL

Andrew H. Friedman,  Principal,  The Washington Update

Washington  - One of President Obama's executive actions is a controversial Department of Labor (DOL) regulation that imposes on financial advisors new obligations when dealing with client IRA accounts. Although many financial advisors agree with the goal of the rule, they believe the onerous compliance requirements do not assure that result, and in some cases actually work against it. The regulation is scheduled to go into effect in April.

President-elect Donald Trump has not mentioned the DOL rule during his campaign. One of his aides, however, has said that this is the type of regulation that Trump will want to overturn.

There are three ways in which repeal of the DOL rule can be accomplished. The first is an act of Congress. There is support in the new Republican-led Congress to overturn the rule; 60 votes will be needed in the Senate, but some Democrats also have expressed concern about its purview. Whether Congress can focus on this matter before April, when the DOL rule goes into effect, is uncertain. Trump will have an ambitious agenda of wide-ranging legislation he wants to enact in his first 100 days, and, as important as it is to our industry, the DOL rule might not make the list.

A regulation also can be overturned without Congressional action by following the same procedures used to promulgate the regulation in the first place. These procedures require the issuance of a proposal to repeal the rule, followed by a months-long period during which comments are collected and testimony given. That process would not be completed before the April effective date. In extreme cases, a new administration may dispense with these lengthy procedural requirements by issuing an "interim final rule" overturning the regulation - or at least postponing its effective date. With the DOL rule about to go into effect, use of such a procedure could be warranted here. It is subject to challenge that the agency did not have "good cause" to circumvent the typical notice and comment requirements.

One last, unlikely route: The Trump administration could simply concede the court actions instituted against the rule, permitting a court to overturn it. Whether a court would do so is uncertain.

Bottom line:  If overturning the DOL rule is a high priority of the Trump administration, it will happen one way or another. On the other hand, if taking action is far down the list of priorities, it is possible the new rule could take effect before repeal procedures are finalized.

Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance and retirement products. They may be reached at www.TheWashingtonUpdate.com .

The authors of this paper are not providing legal or tax advice as to the matters discussed herein. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities). Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.

Copyright Andrew H. Friedman 2016. Reprinted by permission. All rights reserved.

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