Four members of the U.S. House of Representatives—two Democrats and two Republicans—have released an outline of legislation that would serve to replace the Department of Labor’s proposed fiduciary rule.
“We are concerned that the Department of Labor’s current fiduciary proposal may have unintended negative consequences that could harm individuals and families saving for retirement,” wrote the legislators in a release, issued by Representatives Phil Roe, R-Tennessee, Richard Neal, D-Massachusetts, Peter Roskam, R-Illinois, and Michelle Lujan Grisham, D-New Mexico.
The release does not say explicitly that the proposed legislation would stop the DOL from finalizing a rule.
But the lawmakers did issue seven principals on which their intended legislation would be based.
One principal says “public policies must protect access to investment advice and education for low and middle-income workers and retirees.”
Opponents of DOL’s fiduciary rule claim that the proposal’s extensive disclosure requirements on commission-based investment sales would force IRA providers to a fee-based model, which they could not accommodate for low-value accounts.
A recent Morningstar report suggested the rule would initiate an exodus of low-value IRA accounts from exiting brokers.
Ultimately, those accounts would be directed to robo-advisors, which Labor Secretary Thomas Perez has often touted as a conflict-free alternative to the existing brokerage industry.
Opponents of the DOL say that would effectively deny those low-value account holders from financial advice and education.
A second legislative principal outlined by the lawmakers says “public policies should never deny individuals the financial information they need to make informed decisions.”
The DOL has issued two comment periods that elicited thousands of comment letters from industry and stakeholders, as well as hosted a four-day open hearing.
Secretary Perez and other agency leaders have made repeated public comments since, vowing to take industry’s concerns into consideration as it works to finalize an operational regulation.
The agency has vowed to finalize a rule in the first half of 2016. This week, a letter to the agency that originated from Rep. Jared Polis, D-Colorado, said the DOL should hold another 15 to 30 day comment period after it makes its final changes to the rule.
In their letter outlining the principals to their legislative initiative, the four lawmakers said that in spite of the Labor’s pledge to change aspects of its proposal, “more must be done to adequately address concerns about the rule’s impact on the ability of low- and middle-class families to save for retirement.”
Their legislation, when crafted, will require all retirement advisors to serve in their clients’ best interest.
It would also require “clear, simple, and relevant disclosure of material conflicts, including compensation received and all investment fees to individuals saving for retirement.”