The Obama administration appears poised to push ahead with its support of the Department of Labor’s redraft of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act, with DOL’s rule landing at the Office of Management and Budget any day now.
According to Bloomberg, Jason Furman, chairman of Obama’s Council of Economic Advisers, drafted a Jan. 13 memo citing research that says some broker practices, such as boosting commissions with excessive trading, cost investors $8 billion to $17 billion a year. “The document was circulated to senior aides and indicates the White House may support tighter oversight of brokers who handle retirement accounts,” Bloomberg says.
“Consumer protections for investment advice in the retail and small-plan markets are inadequate,” Furman wrote in the memo obtained by Bloomberg News, and also signed by Betsey Stevenson, another member of the economic council. “The current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year.”
ThinkAdvisor reported last July that the White House’s National Economic Council would be performing “industry outreach” regarding the DOL’s fiduciary redraft.
The redraft, which was set to be released in January, should be sent to OMB for review “soon,” Lee Covington, senior vice president and general counsel for the Insured Retirement Institute, said on a Tuesday call.
Andrew Remo, congressional affairs manager for the American Society of Pension Professionals and Actuaries, said in a recent blog post that he expected “the substance” of DOL’s reproposed fiduciary regulation to be sent to OMB for “formal” Obama administration approval “shortly” after the State of the Union address.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, reiterated his intention in a Tuesday morning speech before the U.S. Chamber of Commerce to push for passage of his Secure Annuities for Employee (SAFE) Retirement Act, which he said the Finance Committee “will take up in this Congress.”
The SAFE Retirement Act seeks to torpedo the DOL’s efforts to put IRA advice under a fiduciary standard. The SAFE Retirement Act, Hatch said, “ensures that hardworking Americans will continue to have affordable access to professional investment advice by restoring jurisdiction over the IRA fiduciary duty rule to the Treasury Department and requiring Treasury to consult with the Securities and Exchange Commission when prescribing rules relating to the professional standard of care owed by brokers and investment advisors to IRA owners.”
Added Hatch: “It only makes sense to give Treasury the lead. After all, the fiduciary duty rule for IRAs is in the tax code.”
Hatch said that he looked “forward to seeing the SAFE Retirement Act enacted into law.”
Covington said on the Tuesday call that the Treasury jurisdictional provision in Hatch’s SAFE Retirement Act “may not be necessary,” depending on what DOL’s reproposed rule “looks like.”
In the run-up to the expected release this month to OMB of DOL’s fiduciary redraft, a group of “public interest organizations,” which favor DOL fiduciary action and include the Consumer Federation of America, AARP, Better Markets, Pension Rights Center and Americans for Financial Reform, released Thursday a website called Saveourretirement.com.