Senior members of Congress, both Democrat and Republican, have signed letters calling for a delay or end to the Labor Department’s effort to rewrite the 5-part retirement plan fiduciary definition that deals with those who sell investment retirement accounts.
Those signing letters asking the DOL’s Employee Benefits Security Administration to delay changing the definition include four top-ranking Republicans, who are either the chairmen or the ranking members of key House and Senate committees. Four members of the Missouri House delegation, two Republicans and two Democrats, sent one letter. Eight House Democratic members also sent a letter.
The DOL proposal seeks to update a fiduciary definition that was developed in 1975. Critics of the existing definition say it is so complicated that it excludes some advisors who clearly have violated obligations to act in the client’s best interest.
Other critics say the proposed revision could turn ethical, law-abiding advisors into accidental fiduciaries by creating fiduciary relationships in instances in which there is no written contract establishing an advisor as a fiduciary; and in which the advisor does not appear to be engaging in activities that traditionally would have made an advisor a fiduciary.
In general, the Republican letters ask the agency to delay acting on the proposal or significantly rewrite it to vastly curtail its impact. The request of the eight Democrats, all senior members from urban areas, is more modest.
The letter from the ranking Republicans alleges that a “bright-line regulatory test and guidance that has governed for the past 35 years is being discarded in a manner that is very likely to bring considerable disruption in the service provider and plan sponsor community.”
The letter also says that “one obvious effect” of the DOL’s proposal will be to trigger the IRS code’s prohibited transaction excise taxes for a “vastly larger population of investment professionals with no apparent corresponding benefit for IRA owners.”