Rep. Barney Frank, D-Mass., the ranking member of the House Financial Services Committee, has added his voice to the many in and out of Congress who are calling for the Department of Labor to rethink its amended definition of fiduciary under ERISA.
Frank, co-architect of the Dodd-Frank financial services reform act, wrote a letter to Department of Labor Secretary Hilda Solis urging DOL to “withdraw and repropose” its intended rule amending the definition of fiduciary under the Employee Retirement Income Security Act (ERISA). That rule has been championed by Phyllis Borzi, head of DOL’s Employee Benefits Security Administration (EBSA)
In his Sept. 15 letter to Solis, Frank admits that “some ERISA rules may need to be updated” but said doing so must not be done in “a way that has adverse effects on the choices available to consumers, municipalities, pension plans and others.” He then urges Solis to “withdraw and repropose your rule in coordination” with the SEC and the Commodity Futures Trading Commission (CFTC).
In an interview with AdvisorOne at the annual conference of the Financial Planning Association in San Diego, Dan Barry, FPA’s director of government relations, said that while the association is “very supportive of a fiduciary duty,” the group had been hearing concerns from its members over how the expanded definition would affect them and their businesses, particularly when it comes to IRA rollovers. The concern of FPA and its members, Barry said, was not so much the definition itself, but the lack of clarity on what any exemptions of the rule would like.
The Financial Services Institute, which had urged its members to write directly to President Barack Obama voicing their opposition to the extended definition, quickly responded favorably to Frank’s letter.
In a written statement, Dale Brown, FSI’s president and CEO, said Frank’s letter “adds to the already strong bipartisan consensus of roughly 100 Democratic and Republican members of the House and Senate who have sent letters to the Department of Labor urging them to slow down and study the impact before moving this rule forward. Unfortunately, the Department has not responded to these concerns, and has refused to even acknowledge the need for more study.”
Echoing some of Barry’s concerns, Brown went on to write that “This rulemaking process should and must be suspended until a true impact assessment has been completed. As it stands now, this proposal is a lose-lose, both for advisors and the consumers they help every day.” Brown said FSI “stands ready to work with the DOL to specifically address concerns with the sale and servicing of retirement accounts.”
Barry said that “hearing this from Barney Frank might have more of an effect” in persuading DOL to rethink its proposal.