On March 1, 2017, the U.S. Department of Labor proposed a 60-day delay of the conflict of interest rule and related exemptions (currently set to be applicable on April 10, 2017). The Department opened two comment periods related to the rule:

  1. A 15-day comment period (ending March 17, 2017) on whether enforcement of the rule should be delayed; and
  2. A 45-day comment period (ending April 17, 2017) on the rule’s substance.

The proposal and requests for comments relate to President Trump’s Memorandum, issued on February 3, 2017, in which he directed the Department to examine the rule and related exemptions and prepare an updated economic and legal analysis concerning their likely impact, including:

  • Whether the anticipated applicability of the final rule has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
  • Whether the anticipated applicability of the final rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and
  • Whether the rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.

The President directed that if the Department concludes for any reason that the rule and related exemptions are inconsistent with the Administration’s priority “to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies,” then the Department must propose to rescind or revise the rule.

The proposed 60-day delay observes that the time required for the review directed by the February 3 Memorandum will extend past the rule’s April 10 scheduled applicability date. Furthermore, the Department noted the potential for disruption and unnecessary compliance expenditures if the rule is allowed to go into effect when there is still a chance of rescission or significant revisions.  The proposal also notes that a 60-day delay might not be sufficient for the Department to complete its work and requested comments on the impact of a longer delay – “6 months, a year, or more”.

View From Proskauer – While no one can predict the future, the proposed rule suggests that the Department is taking a close look at the rule and related exemptions and is prepared to delay the rule’s applicability date until it is comfortable that the rule strikes an appropriate balance between regulatory burdens and protecting against conflicts of interest. Although the administration has made public statements denigrating the rule, the proposal suggests that full rescission is not a fait accompli.  We expect to hear comments from diverse interests over the next 15 days, arguing for and against a delay of the applicability date.  It also is reasonable to expect that the Department will wait to make final decision until after a Secretary of Labor is confirmed and leadership of the Employee Benefits Security Administration is in place, to allow the new leadership sufficient time to review the rule and its impact before starting to enforce it or proposing major changes (or full rescission).

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Photo of Russell Hirschhorn Russell Hirschhorn

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group…

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group, which is a significant component of the firm’s ERISA Practice Center and globally renowned Labor and Employment Law Department.  Russell’s practice focuses on employee benefits issues arising under the Employee Retirement Income Security Act of 1974 (ERISA), including class action and complex litigation, U.S. Department of Labor and Internal Revenue Service investigations, and counseling clients on best practices to avoid litigation.

Russell has more than two decades of experience representing plan sponsors, fiduciaries, trustees, and service providers across the country.  His work on behalf of clients has included all types of plans, including 401(k) plans, 403(b) plans, defined benefit plans, employee stock ownership plans, executive compensation plans, health and welfare plans, multiemployer plans, multiple employer plans, and severance plans.  And, it has included the full gamut of claims arising under ERISA, including excessive investment and plan administration fees and investment underperformance claims; cash balance plan litigation; claims for benefits; company stock fund cases; claims for delinquent contributions; ERISA § 510 claims; ERISA statutory claims; ESOP litigation; executive compensation claims; independent contractor claims; independent fiduciary representations; multiemployer fund litigation; plan service provider claims; recoupment of plan overpayments; retiree benefits claims; severance plan claims; and withdrawal liability claims.

Deeply dedicated to pro bono work, Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.  His pro bono work has included serving as lead litigation counsel in several impact litigations: on behalf of social security recipients whose benefits were unlawfully suspended based on an outstanding warrant, deaf and hard of hearing prisoners in Louisiana prisons seeking disability accommodations, and Swartzentruber Amish in upstate New York to obtain religious exemptions from certain building code requirements. Russell also was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people.

Photo of Seth Safra Seth Safra

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined…

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined benefit to cash balance and floor-offset arrangements, ESOPs and 401(k) plans—often coordinating qualified and non-qualified arrangements. He also advises tax-exempt and governmental employers on 403(b) and 457 arrangements, as well as innovative new plan designs; and he advises on ERISA compliance for investments.

On the health and welfare side, Seth helps employers provide benefits that are cost-effective and competitive. He advises on plan design, including consumer-driven health plans with HSAs, retiree medical, fringe benefits, and severance programs, ERISA preemption, and tax and other compliance issues, such as nondiscrimination and cafeteria plan rules.

Seth also advises for-profit and non-profit employers, compensation committees, and boards on executive employment, deferred compensation, change in control, and equity and other incentive arrangements. In addition, he advises on compensation and benefits in corporate transactions.

Seth represents clients before the Department of Labor, IRS and other government agencies.

Seth has been recognized by Chambers USA, The Legal 500, Best Lawyers, Law360, Human Resource Executive, Lawdragon and Super Lawyers.