Lawmakers told Phyllis Borzi, head of the Department of Labor’s Employee Benefits Security Administration (EBSA) on Tuesday, to repropose the agency’s controversial regulation amending the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), because the definition offered is too broad and because EBSA failed to examine the full cost of expanding the definition.
Rep. Phil Roe, R-Tenn., chairman of the House Subcommittee on Health, Employment, Labor and Pensions, told Borzi (left) during a hearing that his committee held on Tuesday to assess the impact of EBSA’s fiduciary proposal, that the current proposal “is an ill-conceived expansion of the fiduciary standard.”
He said that the proposal would “undermine efforts by employers and service providers to educate workers on the importance of responsible retirement planning,” and “may deny investment opportunities and drive up costs for the individuals it is intended to protect.”
Furthermore, Roe argued, the EBSA “failed to examine all of the costs of its proposal,” including how those costs affect the IRA market.
Brad Campbell, former head of EBSA who’s now counsel with Schiff Hardin in Washington, told AdvisorOne on Tuesday that “the most striking aspect of the hearing” was the “strong, bipartisan call for reproposing the regulation rather than rushing to a final rule in November.” There was a “clear bipartisan consensus that the rule is not ready for prime time and should be reproposed.”
Campbell says EBSA “should heed this congressional warning, as the rule will rightly face legal challenge if [EBSA] continues on their current path.”
Congress as well as members of the securities industry may seek to overturn the EBSA rule through court action. On Friday, the U.S. Circuit Court of Appeals for D.C., struck down a Securities and Exchange Commission rule granting outside investors proxy access rights. The decision, by Judge Douglas Ginsburg, determined that the SEC had failed to consider the economic impact of the rule.
Ken Bentsen, executive vice president for public policy and advocacy at the Securities Industry and Financial Markets Association (SIFMA), told subcommittee members in his testimony that the DOL’s proposed revisions to fiduciary “must be withdrawn and reproposed and that necessary exemptions must be promulgated in advance of any final rule.”