The Obama administration has decided to cancel implementation of a final rule that was approved in January and work on rewriting and reissuing some of the regulations that were in the final rule.
The Employee Benefits Security Administration, an arm of the U.S. Department of Labor, has withdrawn regulations issued in January that were developed by the Bush administration to implement the investment advice provisions in the Pension Protection Act of 2006.
The regulations would have encouraged employers to offer retirement plan participants planning advice by establishing guidelines for advice programs.
Supporters of the regulations are condemning the move to withdraw the final rule.
“The Pension Protection Act, which cleared the way for workers to receive customized retirement planning advice, was enacted by Congress with overwhelming bipartisan support,” Rep. John Kline, R-Minn., the highest-ranking Republican on the U.S. House Education and Labor Committee, says in a statement. “I am deeply troubled the administration would unilaterally withdraw these regulations and deprive millions of Americans of an additional tool to help them plan for a secure retirement.”
But EBSA officials say some commenters suggested that a provision in the final rule would have let fiduciary advisors, and individuals providing advice on behalf of those advisors, have financial conflicts of interests without doing anything to mitigate the conflicts.
Other commenters told EBSA that a “fee leveling” provision would have let an affiliate of a fiduciary advisor receive different fees for recommending different products.
“As a result, they argued, a fiduciary [advisor] under such a feeleveling arrangement has a conflict of interest, and the final rule does not adequately protect against investment advice that is influenced by the financial interests of the fiduciary [advisor's] affiliates,” EBSA officials write in the notice about the rule withdrawal.
“The [Labor] Department believes that the questions raised in these comments are sufficient to cast doubt on the conditions’ adequacy to mitigate [advisors'] conflicts,” officials write.
“With regard to the statutory prohibited transaction exemption under ERISA Section 408(b)(14) and Section 408(g), and Code Section 4975, in order to address the absence of regulatory guidance that results from withdrawal of the January 2009 final rule, the Department intends to propose regulations that, upon adoption, implement those provisions,” officials write. “Work is currently being completed on those proposed regulations, and the Department anticipates that they will be published in the Federal Register shortly.”