More than 30 House Democrats sent a letter to Secretary of Labor Hilda Solis on Monday that not only thanked her for Phyllis Borzi’s decision to withdraw the DOL’s proposed rule redefining the term fiduciary, but also set out specific areas the new rule should address when it’s reproposed in early 2012.
The letter, which was also signed by Rep. Barney Frank, D-Mass., ranking member of the House Financial Services Committee, argued that if the previous rule had been finalized, “millions of Americans would have been left without the ability to receive adequate investment education and assistance in planning for retirement. Furthermore, the proposal would have been harmful for the many small businesses that need help in providing retirement benefits for their employees.”
The letter writing effort was led by Rep. Jim Himes, D-Conn., who addressed members of the Financial Services Institute (FSI) at FSI’s Advocacy Summit in Washington in late October.
During the second day of the Advocacy Summit, where FSI members held over 260 meetings on the Hill, “we met with each office that signed the letter, urging them to do so,” says FSI Spokesman Chris Paulitz. “Many of these offices committed to sign the letter during these meetings. FSI and its members followed up with each office via email and/or in person to urge them to sign the letter.”
In order to protect and promote retirement savings, the lawmakers wrote, DOL in its reproposed rule should conduct a thorough review of the need for a new regulation; perform a complete cost/benefit analysis; and take into account the comments submitted.
Borzi, assistant secretary for DOL’s Employee Benefits Security Administration (EBSA), told retirement plan specialists at the American Society of Pension Professionals and Actuaries (ASPPA) annual conference on Oct. 25, that the EBSA would issue a reproposed rule redefining the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) “shortly after the first of the year.”
She said that while the rule proposal will include “the same structure,” the EBSA is working hard on “making changes” to certain aspects of the proposal as well as crafting a “more robust” economic analysis of the rule.
Lawmakers also said in their letter to Solis that DOL needs to “meaningfully and effectively coordinate this rulemaking effort with the SEC and the CFTC so that the Department’s reproposed rule achieves the Dodd-Frank Act’s objective of a uniform standard of care for investors.”
The lawmakers also urged DOL to ensure that the reproposed rule:
- Is narrowly drafted to address well-defined and documented concerns;
- Preserves the access of IRA owners and plan participants to investment services delivered by qualified financial professionals using whatever business model best fits the investor’s objectives; and
- Ensures that companies can receive the investment information they need to establish plans and offer sound investment options to their employees.
Borzi also stressed during her comments on Oct. 25 that the reproposal will apply to both 401(k)s and IRAs, and made clear that critics who’ve claimed the DOL has no jurisdiction over IRAs are “simply incorrect.” She cited an Executive Reorganization of government agencies under the Jimmy Carter administration that gave DOL jurisdiction over IRAs.