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In yet another attempt by Congress to stymie the Department of Labor’s effort to release its fiduciary reproposal, Sen. Orrin Hatch, R-Utah, introduced legislation on Tuesday that would return oversight of IRAs to the Treasury Department—stripping that oversight from DOL.
DOL has received significant pushback regarding its plan to include IRAs in its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), with the most notable complaint being that advisors would lose their ability to earn commissions on IRA advice.
The provision to nix DOL oversight of IRAs is included in a bill, the Securities Annuities for Employee (SAFE) Retirement Act of 2013, which would create a new public retirement plan in which insurance companies pay benefits through annuity contracts. The measure includes wide-ranging modifications to 401(k)s, including expanding employers’ ability to offer annuities in defined contribution plans and making target-date fund disclosure more effective.
The last title of the bill states that jurisdiction of IRA fiduciary regulation oversight should be returned to Treasury. “Prior to the issuance of a 1978 executive order, Treasury had jurisdiction over the fiduciary duty rules applicable to IRAs and those rules are still part of the Internal Revenue Code,” the bill states. That jurisdiction “will be returned to Treasury from the Department of Labor.”
Barbara Roper (left), director of investor protection for the Consumer Federation of America, says that under the bill, Treasury would be required “to start from scratch on a rule proposal,” which “would delay, and could derail entirely, final completion of these badly needed protections for workers and retirees.”
In addition, the bill says that Treasury will have to “consult with the Securities and Exchange Commission in prescribing rules relating to the professional standard of care owed by brokers and investment advisors to IRA owners.”
CFA, Roper says, “strongly supports allowing the DOL to move forward with strengthened fiduciary rules, and we believe application of those rules to IRAs is essential to protect the millions of middle-income workers who need to make every penny count in their efforts to fund a modest retirement.”
Hatch—who said his bill "takes action to stop the DOL from unilaterally over-regulating 401(k) plans and IRAs"—is not the first lawmaker to push legislation to stop the DOL’s fiduciary reproposal from being released in the fall.
On June 19, Rep. Anne Wagner’s bill, the Retail Investor Protection Act, that would require DOL to wait to repropose its fiduciary rule until 60 days after the SEC issues its fiduciary proposal was reported out of the House Financial Services Committee and referred to the House Education and Workforce Committee for consideration.