Fifty-five House Republicans today joined 30 House Democrats in requesting that the Department of Labor significantly narrow its definition of “fiduciary” in a rule the agency is currently drafting that would impact the sale of retirement products.
House Democrats sent a letter to DOL secretary Hilda Solis on Nov. 8—after the agency decided under intense industry and congressional pressure to withdraw the proposed rule.
The proposal was withdrawn in late September by Phyllis Borzi, director of the DOL’s Employee Benefits Security Administration.
Borzi and Solis have said the rule would be re-proposed in January and would keep in mind the concerns of interested parties.
Today, House Republicans sent a letter of their own to the DOL, mainly repeating the Democrats’ points, asking that the DOL, if it decides to re-propose the rule, “recognize the broad range of financial products currently available.”
However, the letter asks that in a re-proposed rule the DOL “avoid costly new regulations that may reduce choice among qualified service providers and investment products.”
Borzi has made clear that IRAs would still be subject to the fiduciary standard in any revised rule. She has noted repeatedly 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.”
The key signer of the Republican letter was Rep. Judy Biggert, R-Ill., chairman of the Insurance, Housing and Community Opportunity Subcommittee of the House Financial Services Committee.
The letter asks that any revised rule “carefully and effectively” target well-defined and documented problems in the retirement planning advice business. and that it “clearly recognizes” that IRA accounts are significantly different from employer-sponsored plans because “the IRA investors nearly a limitless choice among service providers and investment products.”
Dale Brown, president and CEO of the Financial Services Institute, Inc., which represents financial advisors and independent broker-dealers, said today in response to the Republican letter that, “All along, FSI has called for DOL to ‘withdrawal and repropose’, not withdraw and walk away.”
Brown explain that advisors “fully expected and urged DOL to come back with a more appropriate rule based off a sound economic impact study and a true picture of the problem they’re trying to solve.”
He said FSI is “ready to work with DOL to address concerns with the sale and servicing of retirement accounts and to move forward in a way that benefits consumers and the industry alike.