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April 5, 2017

By: Steven E. Saltzman

Photo credit: Wendy Longo Photography

There is a surprise inside for Annuities


The first tip off that there might be more to it is that the Final Rule to Extend the Applicability date of Fiduciary Rule and its related exemptions is 63 pages long.


Granted, there is a good deal of boiler plate language, background notes and rationale which adds to the page count.  However, it did seem that the large number of pages were there to describe something a bit more than, “we going to take 60 more days to look at this”.


In summary, the final rule to delay encompasses the following points:


  • The final rule now extends the applicability date of the new Fiduciary Rule (defining who is a “fiduciary” under ERISA and the Internal Revenue Code) and its related exemptions by 60 days, to June 9, 2017.

  • Full compliance for the Best Interest Contract and Principal Transaction Exemptions remains at January 1, 2018.  However, during the transition period between June 9, 2017 and January 1, 2018, the requirements for using the exemptions have been reduced to only requiring adherence of the Impartial Conduct Standards.

    • As a reminder, the Impartial Conduct Standards require providing advice in retirement investors’ best interest; charging no more than reasonable compensation; and avoiding misleading statements.

  • Similar to the BIC Exemption, the full applicability of the amendments made to PTE 84-24 have now been delayed until January 1, 2018, with the exception that compliance with the Impartial Conduct Standards will become applicable on June 9, 2017.

  • The final rule to delay also extends for the applicability dates of the amendments to other previously granted exemptions (PTEs 75-1, 77-4, 80-83, and 83-1) to June 9, 2017.


Based on its review and evaluation of the public comments, the DOL concluded that some delay in full implementation of the Fiduciary Rule and its exemptions “was necessary to conduct a careful and thoughtful process pursuant to the Presidential Memorandum, and that any such review is likely to take more time to complete than a 60-day extension would afford.”


As such, the DOL has concluded that it would be inappropriate to broadly delay application of the fiduciary definition and Impartial Conduct Standards for an extended period in disregard of its previous findings of ongoing injury to retirement investors.


What’s the surprise for annuities?


From June 9, 2017, until January 1, 2018, insurance agents, insurance brokers, pension consultants and insurance companies will be able to rely on PTE 84-24, as previously written, for the recommendation of all types of annuity products, including fixed indexed and variable annuities.


Until the publication of the final rule to delay, it had been expected that both fixed indexed and variable annuities would remain only under the BIC Exemption and not PTE 84-24.


What does this mean?


If you are an insurance licensed only agent, your search for “Financial Institution” (as required by the BIC Exemption) to sell fixed indexed annuities is over for the remainder of 2017.  Starting in June, you will be a fiduciary when making recommendations to use qualified funds for these purchases, however you will now be able use the less onerous PTE 84-24 as opposed to the BIC Exemption for recommendations of fixed indexed annuities.


If you are a registered rep at a Broker-Dealer, you now should consider the option of using PTE 84-24 as opposed to the BIC for your annuity sales.  Many broker-dealer firms had already decided to only use the BIC Exemption for all annuity products (for many reasons, not the least of which was consistency of process for the Advisor and the client).


While it is not yet clear if the shift in allowing all annuity products to be covered by PTE 84-24 is more than a transitional tactic that will revert to the original plan next year, it could be a signal in terms of where a revision to the rule could be heading.  At minimum, firms should consider outcomes related to the prospect of eventual use of PTE 84-24 for all annuities.  And while also unknown, there could be benefits for the grandfathered status of client recommendations made under PTE 84-24 (as opposed to the BIC Exemption) during the transition period.


If you would like to download the DOL’s notice on the final delay regarding the delay, you can access the document here.  For more detail on the broadening of annuity product types under PTE 84-24, please see page 55.


We hope that these postings are helpful.  We will continue to provide updates when relevant as this issue progresses.



Contact Steve Saltzman with questions or comments at



+1 704 243 4512

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