Podcast Center
Video Center
Webcasts
Resource Center
Events
November 30, 2015 at 07:00 PM
As 2015 drew to a close, intense debate continued regarding the Department of Labor’s planned release in the first half of 2016 of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act.
While it’s safe to say that all sides have been aired — and re-aired — as to how DOL’s rule will negatively impact retirement savers, particularly low- and moderate-income ones, opponents of the rulemaking argue that it will have a particularly devastating impact on annuities and those who sell them.
Since the comment period ended in late September on DOL’s planned rule, the full House passed in late October Rep. Ann Wagner’s bill, H.R. 1090, the Retail Investor Protection Act, which requires DOL to wait to issue its rule until the Securities and Exchange Commission weighs in with its own fiduciary plan.
But the Obama administration didn’t waste time in stating after Wagner’s bill passed that it would be dead on arrival if it reached the president’s desk.
Labor Secretary Thomas Perez noted at a Brookings Institution event in early October in Washington that while DOL was bracing for legal challenges to its fiduciary rule, DOL’s “goal is to help everyone comply,” and that the department will “not engage in the gotcha game” when it comes to compliance. Perez has also stated that he’s “confident” DOL will be making changes to “improve” the rule.
One hundred Democrats also sent a letter to Perez the same month saying that before issuing the final rule they’d like him to lay out the specific changes that would be made to it. But Perez rebuffed that request, stating that to do so would be “irresponsible,” as DOL was still drafting changes to it.
Meanwhile, SEC Chairwoman Mary Jo White said in early November that while the SEC is “flat-out doing” its own fiduciary rule, she couldn’t say when that rule would be proposed, stating, once again, that “it’s not a short, quick, uncomplicated” rulemaking. White said SEC staff is being careful to calibrate a fiduciary rule that “raises the bar of compliance [but] does not have unintended consequences.”
The Lobbying Picks Up Pace
Broker-dealers and small businesses headed to Capitol Hill in November to lobby against DOL’s rulemaking. At the annual Commonwealth Financial Network conference, held in mid-November in Washington, Rep. Mick Mulvaney, R-S.C., called DOL’s planned fiduciary reg “awful,” and urged advisors to start lobbying their senators to slow down DOL’s plan.
“Go to the Senate, knock on the door and see them,” Mulvaney, a member of the House Financial Services Committee, told the 1,300 Commonwealth attendees. The full House, he said, “has done its work” with the passage of Rep. Wagner’s Retail Investor Protection Act.
Such lobbying could be effective, as Rep. French Hill, R-Ark., stated in November at SIFMA’s annual meeting in Washington. He said “discussions” are taking place in the Senate to introduce legislation similar to Rep. Wagner’s bill.
Hill argued that “the existing rules are in place” at the SEC and FINRA “to handle this [fiduciary] issue,” adding that the SEC “should be doing this [fiduciary rulemaking] with FINRA.”
Both Hill and Rep. David Scott, D-Ga., told reporters at the SIFMA event that they would recommend that language to defund DOL’s rulemaking be included in the conferees report on the omnibus spending bill, which was to be debated on Dec. 11.
Scott asked White during her testimony at a House hearing on the SEC’s agenda in late November why she was allowing the DOL to “take over” the SEC’s “clear” authority under Section 913 of the Dodd-Frank Act to write a uniform fiduciary rule for brokers and advisors.
White responded: “I don’t view it that way. I think, again, [DOL and the SEC] are separate agencies,” and that DOL has “authority in the ERISA space.” Dodd-Frank, she added, did not mandate that the SEC write a fiduciary rulemaking.
The Annuities Issue
As to the DOL rule’s impact on annuities, Cathy Weatherford, president and CEO of the Insured Retirement Institute, told me in an email message that DOL’s plan would limit savers’ lifetime income options. “The rule as proposed removes variable annuities from the scope of Prohibited Transaction Exemption 84-24, which for more than 30 years has been used to make lifetime income available to savers through IRAs,” Weatherford said.
