The Office of Management and Budget said Monday that it has finished its review of the Department of Labor’s request to delay implementation of its fiduciary rule.
OMB noted its completed review on its website.
After receiving a directive from President Donald Trump on Feb. 3 to review its fiduciary rule, and if it deems appropriate, to come up with a plan to revise the rulemaking, Labor’s acting secretary, Edward Hugler, filed in short order with the OMB to delay the rule’s April 10 compliance date.
Tom Clark, an attorney with The Wagner Law Group, said Tuesday that he expected the Labor Department to announce how much of a delay it was seeking as soon as Tuesday, adding that Labor "will not delay [the rule] until after the proper notice and comment."
OMB's finished review now tags the rule as "economically significant."
Kristina Zanotti, a partner at K&L Gates in Washington, said Tuesday that such a label signals that the rule “requires greater scrutiny.”
Dan Crowley, a partner at K&L Gates who leads the firm’s global financial services policy practice, added on Tuesday that Trump’s executive memo directed Labor to review the delay request from a “cost/benefit” standpoint, adding that OMB is merely signaling that they are “finding there are significant” cost/benefit issues with the fiduciary rule, “giving [DOL] cover to delay” the rule.
Crowley said that he still anticipates a six-month delay.
With OMB's approval on Monday, "in effect, the proposed rule was returned to the Department of Labor for publication in the Federal Register," adds Fred Reish, a partner in Drinker Biddle & Reath's employee benefits and executive compensation practice group in Los Angeles. "I suspect that will happen this week or the first of next week."
Reish believes Labor will issue a proposed rule with a 14-day comment period. "At the end of that, all of the comments will be reviewed by the DOL and a final rule will be drafted. Keep in mind, though, that the rule is only about the delay of the applicability date, so the drafting of the final rule should not take much work."
The big question, Reish adds, "is whether the delay in the applicability date will be 60 days from April 10 or whether it will be 180 days. There are conflicting rumors about that."
Once OMB releases Labor’s proposal to the public in the Federal Register, “we will know the length of the delay of the rule’s applicability date and whether stakeholders will have an opportunity to provide comments before or after the delay is effective,” Zanotti and her colleagues wrote in a recent client alert.
The question remains as to whether Labor’s proposal at OMB is a proposed rule or an interim final rule.
Step one “is delay the [DOL fiduciary] rule, which will happen, probably by an interim final rule that is effective upon issuance that solicits comment,” Crowley told ThinkAdvisor in a Feb. 21 interview.
OMB met with several groups last week, including AARP and Better Markets, which fueled speculation that its approval of the Labor Department’s plan to delay the rule was imminent.
Meanwhile, the nine plaintiffs suing the Labor Department over its fiduciary rule in a Texas court said late Friday that they were appealing Judge Barbara M.G. Lynn’s Feb. 8 decision upholding Labor’s rule.
“We remain confident in the merits and strength of our case and stand by our assertion that the Department of Labor exceeded its authority,” said the plaintiffs, which include the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, and the Financial Services Institute, in a joint statement announcing the appeal.
Five national co-plaintiffs filed the Feb. 25 appeal in conjunction with the Greater Irving-Las Colinas Chamber of Commerce, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce and Texas Association of Business.
The case will now move to the U.S. Court of Appeals for the Fifth Circuit.
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