In a letter addressed to Rep. Ann Wagner, R-Missouri, Labor Secretary Thomas Perez vowed to move forward with finalizing the Department’s proposed conflict of interest rule, which would impose fiduciary standards on nearly all advisors to IRAs and 401(k) plans.
In a letter sent to Perez last week, Wagner and 19 other House members, including two Democrats, expressed concern that a final rule will be markedly different from the proposal now being vetted in an open public meeting hosted by the DOL.
Amendments to the proposal would require further review by stakeholders. For that reason the DOL should be required to re-propose the rule, reinitiating the rule-making process.
“We feel it is in the interest of our constituents that the DOL re-propose this fiduciary regulation to ensure adequate stakeholder involvement in the notice and comment period during a new formal rulemaking process,” wrote Wagner.
Her letter came as moderate Democrats in the Senate also wrote Perez expressing their concerns over the proposal.
In his response to Wagner, Perez detailed years of coordination with industry stakeholders that went into the proposal.
“The new proposal was designed to allow for the flexibility the financial services industry requested,” wrote Perez.
Finalizing a rule that puts clients’ interests first is a “simple premise presented with an open mind,” he added.
And the high level of interest and contribution to the rule-making process from stakeholders proves recognition of the growing problem of conflicted advice, and a “get to yes” attitude that will lead to a “meaningful and workable” rule, said Perez.
Perez’s insistence that a rule will be finalized raises the question of whether Congress can mount a legislative option to halt implementation of the rule and whether enough bipartisan support can be mustered to that end.
In 2013, Rep. Wagner sponsored the Retail Investor Protection Act. It passed the House by a vote of 254 to 166, with 30 Democrats voting for the bill, which would have required the Securities and Exchange Commission to take the lead in writing a uniform fiduciary standard.
It later stalled in the Senate.
A new stand-alone law prohibiting the DOL to implement a rule would have to survive a likely veto from President Obama.
Another option raised by Wagner in an interview with BenefitsPro, a sister property of LifeHealthPro, would be to defund the DOL and its ability to implement and enforce a new rule through the appropriations process.
That would require attaching a rider to an overall spending bill that President Obama would have to sign.
Some stakeholders have speculated the President would be unlikely to sign a spending bill with a provision to defund the DOL’s rule, given the political capital he has already laid out in support of the effort.
But advocates of the DOL’s proposal, including Barbara Roper, director of investor protection at the Consumer Federation of America, have expressed concern that the President could be forced to sign a spending bill at the 11th hour that includes a provision to defund the DOL’s rule.