WASHINGTON— House Democrats are asking the Department of Labor to substantially narrow the scope of the term “fiduciary” for purposes of selling retirement products in any new rule proposed by the agency.
More than 30 Democrats, members of both the House Financial Services and Ways and Means Committee joined in sending the letter Monday to DOL secretary Hilda Solis.
The letter “applauded” the agency’s decision to withdraw and re-propose the rule.
“Again, thank you for withdrawing the proposed rule defining the term ‘fiduciary’, thereby opening the door to a more robust public policy dialogue,” the letter said. “We look forward to working with you on these critical issues.”
It deals with the agency’s decision in September to withdraw and re-propose a regulation that would have imposed a fiduciary standard on sale of IRAs and similar products covered under the Employee Retirement Income Security Act.
The rule was withdrawn by Phyllis Borzi, director of the DOL’s Employee Benefits Security Administration under intense pressure from members of Congress, both Democratic and Republican, as well as investment advisors and others who sell retirement products.
She promised that it would be re-proposed in January and would keep in mind the concerns of interested parties.
But, Borzi has made clear that IRAs would still be subject to the fiduciary standard in any revised rule.
Borzi has repeatedly said that federal retirement laws must be updated to protect workers and retirees who are now responsible for their own nest eggs through defined-contribution plans such as 401(k)s and IRAs.
In an appearance before a group of retirement professionals in October, the American Society of Pension Professionals and Actuaries, she said that, “We’ve created a system in which people’s retirement assets have gone from a regulated [defined-benefit] system to a system in which most of the assets are moving out at a rapid pace into the IRA marketplace, which is far less regulated than any other marketplace.”
Signers of the letter include Rep. Barney Frank, D-Mass., ranking minority member of the Financial Services Committee (FSC), as well as Rep. Carolyn McCarthy, D-N.Y., who is also a member of the committee, as well as of the New Democrat Coalition, which took the lead on behalf of Democrats to get the rule withdrawn.
The letter said that if the previous rule had been finalized as proposed, “millions of Americans would have been left without the ability to receive adequate investment education and assistance in planning for retirement.”
Furthermore, the letter said, “the proposal would have been harmful for the many small businesses that need help in providing retirement benefits for their employees.”
The letter was written with the help of the Financial Services Institute Inc., which lobbies for investment advisors and smaller broker-dealers. The group had argued that the strict rule would have forced smaller broker-dealers to withdraw from the retirement market.
It asks that the revised rule be:
– 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
– Ensure that companies can receive the investment information they need to establish plans and offer sound investment options to their employees.