1 What is the effective date?
The Department of Labor (DOL) fiduciary rule applicability date is June 9, 2017. Full compliance is required on January 1, 2018.
During the transition period of June 9 to December 31, 2017, fixed index annuities (FIAs) and variable annuities (VAs) may be sold under the Best Interest Contract Exemption or under the Prohibited Transaction Exemption 84-24 (PTE 84-24).
LifeAnswers Financial Group has made the decision that our agents will use the PTE 84-24 exemption between June 9 and December 31, 2017. You can access an example of our PTE 84-24 form.
2 Must agents get a securities license to continue selling qualified annuity and life products?
At this time, and through the transition period ending January 1, 2018, agents do not need any new licenses or to affiliate with a financial institution to continue selling qualified annuity and life insurance products.
3 What is the impact of the Rule on annuity and life sales?
The Rule impacts qualified annuity and life sales with these new regulatory obligations:
- Agents selling annuity products involving qualified funds are now fiduciaries.
- Agents are responsible for and obligated to comply with laws, regulations and rules applicable to the sale of FIAs.
- Agents are solely responsible for fulfilling fiduciary obligations resulting from the Rule and applicable Prohibited Transaction Exemptions (PTEs). Including disclosure of conflicts of interest and documentation requirements. (Make sure you check out our sample form.)
- Agents must provide financial advice and recommendations that are in their client’s best interest, free from misrepresentations and in exchange for what they determine is reasonable compensation.
4 What are the key dates for compliance?
June 9 – December 31, 2017 (Transition Period)
- The expanded fiduciary definition is in effect.
- To receive a commission for IRA or life product sales or a rollover from an ERISA Plan or 401(k), producers can use either the PTE 84-24 exemption or the BICE for traditional fixed, fixed-indexed and variable annuity business. This includes new sales and additional purchase payments to existing contracts.
Beginning January 1, 2018
- Full compliance with the final fiduciary rule is required. Transitional rulings and procedures are expired.
- Producers must use the BICE and be affiliated with a financial institution to receive a commission for fixed-indexed annuity IRA sales or a rollover from an ERISA Plan or 401(k) to an IRA.
- Producers can use either the PTE 84-24 Exemption or BICE to receive a commission for traditional fixed annuity business.
Learn more about how LifeAnswers DOL Platform meets all of the Rule’s requirements at no cost to you, with no new licensing, and no technology costs.
5 How is PTE 84-24 used to comply with the Rule?
To use the PTE 84-24 exemption from June 9 through December 31, 2017, agents must:
- Comply with the Impartial Conduct Standards.
- Provide a written disclosure of material conflicts of interest using a written PTE 84-24 disclosure prior to completing the sale transaction. (Access a sample of our form.)
- Keep support for the product recommendation in a documented file for six years.
6 What are the Impartial Conduct Standards?
The Impartial Conduct Standards are the core principles of the new rule. Essentially, these standards specify that any qualifying recommendation must:
- Be in the best interest of the investor without regard to the advisor or his company’s financial or other interest.
- Not result in compensation that is in excess of reasonable compensation for the advisor or his company.
- Not involve statements that could be considered misleading.
7 Is there mandated training for agents?
In short: no. However, there is suggested training we highly recommend you take advantage of:
- WebCE makes a DOL Fiduciary Rule training course available here. WebCE charges $14.95 for the course and provides two continuing education credits. (Use code D0361295 for a 10% discount.)
Learn more information about getting up to 12 FREE CE Credits.
8 How will the Rule be enforced during the transition period?
Both the DOL and the Internal Revenue Service (IRS) have stated that during the transition period they will not enforce the Rule while producers are working diligently and in good faith to comply with the Rule.
Please note that the DOL does not take away any rights from a consumer to sue. Having the disclosure document in place and in a documented file is critical to proving good faith effort to comply with the Rule.
9 What changes are carriers putting in place to how business is conducted?
Carriers are gradually disclosing their policies and procedures relating to implementing the Rule.
What we have seen to date is as follows:
- Most are expecting agents to use PTE 84-24 to conduct business during the transition period. (Access a sample of our form.)
- Agent contract addenda are being issued, clarifying legal liability and Rule compliance responsibilities.
- Annuity business will be processed in a normal manner through the transition period with the exception that carriers are amending their paperwork to require agent attestation that they have complied with the Rule.
- 2017 compensation plans are being modified, but not on a widespread basis.
- 2018 plans will not be known until later in the year.
- Carriers will be offering voluntary training to assist agents in complying with the Rule.
10 What areas are still unknown and need attention?
There are some unknowns to be aware of:
- The Rule may go into full implementation on January 1, 2018 or it may be modified.
- How enforcement will truly work. There are some concerns about self-enforcement, and that agents may report other agents who are not compliant.
- How life insurance sales will be impacted.
LifeAnswers DOL Platform
The LifeAnswers DOL Platform has the following elements at no cost to you, requires no new licenses and no technology fees:
- A select platform of top rated carriers
- Full product training support
- Referrals to industry sources for fiduciary and Rule training
- Suggested DOL disclosure format based on platform carrier suggested formats
- Available group E&O coverage including Fiduciary Rule coverage
- Annuity selector tool to be made available
- Full optional e-app support for all carriers effective during July
Please provide the following information to learn more about LifeAnswers DOL Platform and gain immediate access to a sample of our PTE 84-24:
For use with financial professionals only. Not for public distribution.
Discussion of the Department of Labor (DOL) Fiduciary Rule is based on the information available from the DOL, pending litigation, and other sources deemed to be reliable as of the date of this communication. The views and opinions of LifeAnswers Financial Group are subject to change as regulatory guidance from the DOL becomes available and court opinions are published.