According to the Semiannual Regulatory Agenda for the Department of Labor’s Employee Benefits Security Administration, a reproposal to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) will come in October.
Despite numerous efforts by Congress and industry lobbying groups to push that deadline back—or outright derail it—all signs point to the DOL sticking to that schedule. A recent letter from 10 Democratic senators to the Office of Management and Budget, where DOL is expected to send its rule proposal sometime in September, is a good indication that those senators expect the proposal to land at OMB any day now.
Fred Reish, partner and chairman of the financial services ERISA team at Drinker Biddle & Reath in Los Angeles, told Investment Advisor that he believes the DOL’s controversial fiduciary “train has left the station” and is headed to OMB.
The next step, he said, will be “to see the proposed regulation and the related proposed prohibited transaction exemptions. If the DOL has responded to the most important concerns of the private sector, then the reproposal could be less controversial than contemplated.”
Both Reish and Robert Lewis, vice president of legislative affairs for the Financial Services Institute, agree that the recent confirmation of Assistant Attorney General Tom Perez as secretary for the department will not change DOL’s fiduciary course. “DOL has been moving forward [on its fiduciary plan] most of the year with an acting secretary,” Lewis says. “We do not expect anything to change with [Perez’s] confirmation.”
FSI, which has been a staunch opponent of DOL’s fiduciary plan, said in a statement that it “looks forward to working with [Perez] in the future, especially as his department moves forward on their rule redefining the definition of ‘fiduciary.’”
However, while the DOL may succeed in getting a reproposal to OMB by October, it could be held up once it gets there. Indeed, it looks as though the senators see OMB as a clear stalling point.
DOL is required to send its rule proposals to OMB, but the Securities and Exchange Commission (SEC) is only required to send final rules to OMB.
Once DOL sends OMB its reproposed fiduciary rule, OMB then checks the proposal’s cost-benefit analysis and gives DOL feedback on the proposal, asking for changes if necessary. DOL must then make the changes and have them approved by OMB before putting the proposal out for public comment.
As the senators—members of the Senate Banking and Health, Education, Labor and Pension Committees—told Sylvia Mathews Burwell, OMB’s director, in an early August letter, they want OMB to carefully review the DOL’s fiduciary redraft to ensure that it doesn’t “directly conflict” with or “upend” the Securities and Exchange Commission’s work on its fiduciary rule.
Given OMB’s role in “coordinating and streamlining” agencies’ regulations, the senators said, “We write to make you aware of the potential conflicts between these two regulations.”