Source: National Association of Health Underwirters
The Department of Labor (DOL) announced on Monday through a bulletin and an op-ed in the Wall Street Journal by DOL Secretary Alexander Acosta that the fiduciary rule will not be further delayed beyond June 9. The rule was originally set to go into effect in April but was delayed by 60 days under a re-opened public comment period. NAHU submitted comments, again stressing our concerns for the proposal to expand the definition of plan fiduciary to cover those who assist with Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs). NAHU also submitted a sample question and answer document for how brokers should handle HSAs in relation to the rule, but this was not adopted by the then Obama Administration. We are resubmitting this document for possible use by the Trump Administration. The rule will now take effect on June 9 with delayed enforcement through January 1, 2018, when claims will not be pursued against fiduciaries who work in good faith to comply with the rule.
The fiduciary rule was released in April 2016 to address conflicts of interest in retirement advice. It established how investment advisors who assist employers and employees with “investment property” components of a group benefit plan governed by the Employee Retirement Income Security Act (ERISA), including HSAs, may have fiduciary responsibility even if they provide advice on a one-time basis. Typically, individuals who are a fiduciary of a group benefit plan regulated by ERISA may not receive compensation or commissions from third-party vendors that provide services to the group benefit plan. However, a separate piece of guidance issued by the DOL established a “best interest contract exemption” that allows advisors to be paid commissions for their work, as long as they follow very specific requirements. The requirement also extends to insurance brokers who help employers set up HSAs in conjunction with the sale and service of high-deductible health plans.
NAHU repeatedly commented that applying the rule to HSA advice did not align with the intention of this rule. Our comments noted that the current rule would reduce employee access to HSAs, and greatly diminish the access both employers and employees will have to the advice of licensed health insurance agents and brokers. We called for these provisions of the rule to be stricken, or if not possible to strike these sections, and requested additional guidance about the applicability of this regulation to employers that offer HSA options to their employees and to their licensed advisors.
Unfortunately, the final rule established that advice regarding “investment property” does not preclude people who provide employer-sponsored benefit plans with health, disability, and term life insurance policies and other assets that do not contain an investment component. Even though the DOL acknowledged in the preamble to the rule that these accounts generally hold fewer assets and may exist for shorter durations than IRAs, they feel that owners of these accounts and the persons for whom these accounts were established are entitled to receive the same protections from conflicted investment advice as IRA owners. Accordingly, the final rule continues to include these “plans” in the scope of the final regulation, meaning that health insurance agents and brokers who help employers and employees set up HSA accounts could be taking on fiduciary responsibility for doing so, and could have to abide by the new rules established by the best interest contract exemption guidelines.
Congressional Republicans had previously attempted to overturn the fiduciary rule through the Congressional Review Act (CRA), which allows Congress to overturn federal regulations with only a simple majority. However, given that Republicans didn’t have veto-proof majorities in either chamber to override President Obama, they were unable to garner enough support to send a CRA to President Obama in time to overturn the regulation through this process. The re-opened comment period on the rule was initiated through an executive order issued by President Trump on February 3 instructing the DOL to review the rule prior to its original effective date in April.