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Updates on SECURE, RESA, Reg BI, and the Fiduciary Rule

Estimated reading time: 2 minutes, 40 seconds

On the heels of seeming confirmation of a fiduciary rule revival comes a barrage of other activity in Washington. Thanks to the efforts of Congress, the Securities & Exchange Commission (SEC), and Department of Labor (DOL), retirement and non-retirement account holders alike could see significant changes coming to the industry.

The SECURE and RESA bills, and recent SEC and DOL investment advice reform proposals, make changes to the industry possible—if not likely.

Last week, the House of Representatives passed significant retirement legislation, the Setting Every Community Up for Retirement Enhancement (SECURE) Act. If passed in both houses, SECURE would result in arguably the most significant changes to retirement plans this decade. Highlights of SECURE include

  • enhancing small businesses’ ability to participate in a multi-employer plan (MEP);
  • increasing access to annuities in 401(k) plans;
  • establishing tax incentives to encourage 401(k) or SIMPLE IRA plans to include automatic enrollment; and
  • raising the required minimum distribution (RMD) age from 70½ to 72.

The Senate introduced a strikingly similar bill, the Retirement Enhancement & Savings Act (RESA) around the same time. Along with similar elements as SECURE, RESA would

  • expand Traditional IRA contribution eligibility by removing the age limit and allowing graduate student IRA contributions;
  • permit S Corp ownership in IRAs;
  • require quicker distributions to nonspouse beneficiaries; and
  • under certain circumstances, provide lifetime income portability for employer plans.

Like SECURE, RESA maintains significant bipartisan support. Therefore, we can anticipate some work between the two houses to sort through the differences between the two, which may result in a passable bill of major significance to retirement account holders before year’s end.

In addition to SECURE and RESA, comments from the SEC and DOL also have industry experts anticipating changes.

In a meeting record dated May 23, 2019, the SEC noted it will consider investment advice reform on June 5. Zeroing in on its proposed regulation best interest (or “Reg BI”) standard, the matters to be considered include whether to

  • adopt a new rule to establish a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation to a retail customer of any securities transaction or investment strategy involving securities;
  • adopt new and amended rules and forms to require registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors;
  • publish a Commission interpretation of the standard of conduct for investment advisers; and
  • publish a Commission interpretation of the solely incidental prong of section 202(a)(11)(C) of the Investment Advisers Act of 1940.

Brokers would be subject to Reg BI under the SEC’s reform package, while investment advisors would remain as fiduciaries.

Speaking of fiduciaries, the DOL is likely to frame its new fiduciary rule legislation based on the SEC’s reform. If you look at the DOL timetable related to the rule, you’ll see “NPRM” slated for December of this year. The initialism stands for “notice of proposed rulemaking,” which indicates the DOL will propose a new fiduciary rule at that time.

The industry will have plenty of opportunities, it would appear, to debate the merits of any of these rules or legislation. Kingdom Trust remains acutely aware of how any of these proposed changes affect our account holders. We’re here to help ensure you know precisely what to discuss with your team of professionals once any proposals become reality.

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