Yesterday, NAHU submitted comments to the Department of Labor (DOL) on the fiduciary rule, which was delayed by 60 days by the Trump Administration last month and re-opened for public comment. As with our previous comments when the rule was first proposed, we again reiterated 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). Our comments noted that the current rule, originally set to go into effect on April 10, 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, we requested additional guidance about the applicability of this regulation to employers that offer HSA options to their employees and to their licensed advisors.
The fiduciary rule was released last April 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 and is set to take effect on January 1, 2018.
NAHU repeatedly commented that applying the rule to HSA advice did not align with the intention of this rule. 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.
In addition, the IRS released guidance this week that they will not be applying excise taxes under §4975 of the IRS code, which requires an excise tax to be levied on any prohibited transactions that violate the fiduciary rule. This guidance coincides with the DOL delay of the fiduciary rule, and is intended to provide relief to those who may be subject to the fiduciary rule so that they may avoid any penalties during the delay of the implementation of the rule.