With the expected release soon — maybe March — of the Department of Labor's rule to change the definition of fiduciary on retirement advice, lobbying groups are positing that legal and legislative remedies may be needed to fix the rule.
David Hirschmann, president and CEO of Chamber Center for Capital Markets Competitiveness, said during a mid-February briefing at the U.S. Chamber of Commerce's headquarters in Washington that if “significant concerns” are not addressed in DOL's final rule once it's released by the Office of Management and Budget, the Chamber may take legal action or seek a legislative remedy.
While Hirschmann said that it's too early to predict whether the next step in opposing DOL's rule to change the definition of fiduciary under the Employee Retirement Income Security Act will be “legislative or in the courts,” the Chamber will go to court only when its members say “complying with the rule is impossible.”
Said Hirschmann: “We’ve never said ‘kill the rule,’ we’ve said ‘fix the rule.’” If it turns out that DOL didn't listen to its suggestions, maybe “we should have just killed it, but engaging constructively is the right approach” to addressing what the Chamber views as the rule's shortcomings.
Legal challenges to DOL's rule, once released, may focus on the lack of a sufficient cost-benefit analysis, the private right of action DOL tries “to create,” as well as legal “regulatory process” challenges, Hirschmann said.
Review of the DOL's rule at OMB is expected to be completed as early as April. Hirschmann said that while he couldn't predict whether the rule is undergoing an expedited review, as some news sources have reported, DOL “pre-cleared” the rule with OMB before sending it there on Jan. 28.
Alice Joe, managing director for the Chamber's Center for Capital Markets Competitiveness, added during the briefing that the Chamber has urged OMB to “take a closer look” at the DOL rule's cost-benefit analysis, saying she wouldn't be surprised if OMB has shared the rule with the Securities and Exchange Commission and asked for the agency's “clearance.”
Part of OMB's review “is to make sure that the [DOL] rule doesn't conflict with the SEC's” areas of jurisdiction, Hirschmann added.
Actions in Congress on DOL Rule
Rep. Jared Polis, D-Colo., said during the Feb. 2 markup of two bills to replace DOL's rule that considering the bills is “premature,” and that lawmakers “should be having this discussion after we see the final [DOL] rule.”
Polis, ranking member on the Health, Employment, Labor and Pensions subcommittee (also known as HELP), sent a letter to OMB the same day requesting a “private and secure” viewing for himself and other lawmakers of the rule DOL sent for OMB review on Jan. 28.
The bills approved on Feb. 2 are the Affordable Retirement Advice Protection Act (H.R. 4293), introduced by Rep. Phil Roe, R-Tenn., and the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act (H.R. 4294), introduced by Rep. Peter Roskam, R-Ill.
Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, along with Dale Brown, president and CEO of the Financial Services Institute, wrote in a recent op-ed along with seven other trade groups opposed to DOL's rule that “it is imperative that more members of Congress sign onto these bills — and Congress act on them — to ensure Americans’ best interests are served.”
Hirschmann noted that members of Congress have told the Chamber that if DOL has not fixed some of the primary concerns [in the rule], “they are willing to take the next step legislatively.”
In early February, Sen. Roy Blunt, R-Mo., introduced the Retail Investor Protection Act, companion legislation to Rep. Ann Wagner's previous bill, to stop DOL from moving forward on its fiduciary rule.
The bill is co-sponsored by Sens. Mike Crapo, R-Idaho; Steve Daines, R-Mont.; Johnny Isakson, R-Ga.; Mark Kirk, R-Ill. and Shelley Moore Capito, R-W.Va.
In introducing the bill, Blunt said the DOL rule would “increase costs, reduce access to advice and services, limit options and lead to lower retirement savings for millions of Americans.” He called the DOL rule an “‘ill-advised’ regulation” that “interjects the federal bureaucracy between Missouri families planning for retirement and the experts they’re counting on for financial information, to the detriment of both.”
Wagner, a Missouri Republican whose bill passed the House of Representatives in October, “has already taken action to rein in the DOL and protect Missouri families, and I urge my Senate colleagues to do the same,” Blunt said.
Marilyn Mohrman-Gillis, managing director of public policy and communications for the CFP Board — part of the Financial Planning Coalition — said she was hopeful that the Senate will “reject this latest effort to impede the DOL from moving forward to put in place a long overdue strengthened fiduciary rule to protect retirement investors.”
Wagner said in a statement that she “applauds” Blunt for introducing this legislation that has passed the House “twice with bipartisan support.”
But Barbara Roper, director of investor protection for the Consumer Federation of America, said that the second House vote — with less support from Democrats — made it clear that support for the Wagner bill “has faded,” while the lack of Democratic co-sponsors for Blunt's bill “reinforces that message.”
--- Check out 3 Big Holes in DOL Fiduciary Proposal, ICI Says on ThinkAdvisor.