Page 31 - Investment Advisor December 2022/January 2023

RISA attorney Lisa Gomez was confirmed by the full Senate Federation of Americans for Consumer Choice in the U.S.
Ein late September to head the Labor Department’s Employee District Court for the Northern District of Texas.
Benefits Security Administration and is now in charge of This district, Borzi said, is “the go-to court for all the
Labor’s new fiduciary rule — which faces another delay. forum-shopping financial services and business suits against
Labor’s new fiduciary rule likely won’t be sent to the Office the DOL and other cabinet agencies.” The lawsuit challenges
of Management and Budget for review until the first quarter of the Trump-era Labor Prohibited Transaction Exemption, or
2023, according to retirement industry experts. PTE, 2020-02, Improving Investment Advice for Workers &
Sen. Patty Murray, D-Wash., chairwoman of the Senate Health Retirees, which establishes more stringent rollover rules and
Education Labor & Pensions, or HELP, Committee, said after became effective on Feb. 16.
Gomez was confirmed by the Senate that “it was important to me The other suit, filed Feb. 9 by the American Securities
that EBSA have an experienced leader like Association in the U.S. District Court for the Middle District
Ms. Gomez given its massive respon- of Florida, Tampa Division, alleges that Labor violated the
sibilities helping retirees recover the Administrative Procedure Act “when it issued its FAQs on PTE
benefits they are entitled to, enforc- 2020-02 without public notice and comment,” Borzi said.
ing protections for people who get The suit “challenges the FAQs generally, but with specific
their health care coverage through focus on FAQ 7 and FAQ 11,” she pointed out. “Both of these
their job, and overseeing millions questions focus on the specifics of establishing a fiduciary rela-
of retirement plans, health plans, tionship in a rollover context and the documentation needed
and other welfare benefit plans.” to support the notion that a rollover recommendation is in the
The reveal of Labor’s new rule client’s best interest.”
to define who’s a fiduciary “will prob-
ably slip to the first quarter next year,”
according to Phyllis Borzi, former head of Labor’s Employee
Benefits Security Administration. This is partly “because of how
many other regulatory projects they are working on and in part
because they may want to see what happens in the courts with
the two lawsuits that have been filed” against Labor.
Brad Campbell, also a former head of EBSA and now a
partner at Faegre Drinker in Washington, agreed in another
email that it’s likely Labor’s new rule will not be published
in December as it has “not yet been sent to OMB for review.” In early October, the Internal Revenue Service waived the 50%
The normal OMB review takes up to 90 days, “but rarely penalty on missed 2021 and 2022 required minimum distribu-
less than two months for significant rules,” Campbell said. “To tions for inherited retirement accounts within the 10-year
be published in December, the proposals would likely need to payout rule. With Notice 2022-53, the IRS “answered the No. 1
be sent to OMB in September or early October.” question” that advisors and retirement industry officials have
Campbell, however, said it’s hard to discern whether the been asking about the proposed Secure Act required minimum
“apparent delay is due to the ongoing litigation or to broader distribution [regulations] issued in February,” according to Ed
political considerations.”
Slott of Ed Slott and Co.
Powell: Al Drago/Bloomberg early June, that the reveal of its new fiduciary rule would come ited in 2020 or later and were subject to the 10-year rule,
The confusion “surrounded those beneficiaries who inher-
Labor said in its regulatory flexibility agenda, released in
where the entire inherited IRA balance would have to be with-
in December. However, dates set out in reg flex agendas are
traditionally placeholders, and may not reflect the actual date
drawn by the end of the 10th year after death,” Slott explained.
In the proposed regulations, the IRS said “that if these
that a fiduciary plan would be released.
There are currently two pending lawsuits against Labor
beneficiaries inherited from someone that was already taking
regarding fiduciary advice. One was filed on Feb. 2 by the
RMDs, then not only are they subject to the 10-year rule, but
DECEMBER 2022/JANUARY 2023 INVESTMENT ADVISOR 29