NY Proposed ‘Best Interest’ Rule Omits Retirement Plans

In the functional absence of the Department of Labor’s fiduciary rule, some states have taken matters into their own hands. The latest is New York — but the proposal recently unveiled is of limited scope and notable for what it leaves out.

The New York Department of Financial Services’ (DFS) proposal would amend 11 NYC 224 to adopt a “best interest” standard for those licensed to sell life insurance and annuity products.

The proposal specifically omits retirement plans from its scope. It says that the transactions to which it does not apply unless otherwise specifically included are:

• an employee pension or welfare benefit plan covered by ERISA;

• retirement plans established or maintained by an employer, including 401(k)s, 403(b)s and plans under Internal Revenue Code Sections 401(a), 408(k) or 408(p);

• government or church plans under Internal Revenue Code Section 414; and

• 457 plans offered by state, local government or tax-exempt organizations.

The DFS intends that the proposal will protect consumers from “unnecessarily high costs and conflicted financial advice.” New York Gov. Andrew Cuomo (D) said in a press release that through the proposal, “we are working to protect everyday New Yorkers and give them peace of mind when purchasing these products."

The proposed amendments are subject to a 60-day notice and public comment period following their publication in New York State Register on Dec. 27, 2017.