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Laws requiring Congress’ approval of DOL fiduciary rule move to House

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Companion legislation crafted as an alternative to the Department of Labor’s proposed fiduciary rulepassed a U.S House of Representatives Education and Workforce Committee hearing on a party-line vote.

The Affordable Retirement Advice Protection Act, introduced by Rep. Phil Roe, R-Tennessee, and the Strengthening Access to Valuable Education and Retirement Support Act, introduced by Rep. Peter Roskam, R-Illinois, survived the mark-up hearing with 22 Republican votes, and 14 Democratic dissenters.

Each bill is co-sponsored by at least several Democrats.

Together, they would insist a best-interest standard of care on providers of financial advice to retirement plans and IRAs, based on a set of principals that would assure no regulation could restrict low and middle-income Americans’ access to retirement planning.

Both bills would also give Congress the authority to vote down the DOL’s rule within a 60-day period after it is ultimately finalized.

That provision is “constitutionally suspect,” according Rep. Bobby Scott, D-Virginia, the ranking member on the committee.

Scott, a strong supporter of the DOL’s proposal, said the two proposed bills represent a “deeply flawed” response to the DOL’s rule, in part because they establish what he said was a “one house veto” power that violates the separation of powers established in the U.S. Constitution.

Further more, the alternative legislation creates advisor disclosure requirements that are too lax, and allow unscrupulous advisors “to use fine print and boilerplate language” to “disclose and disclaim away their fiduciary obligation,” said Scott.

The DOL recently sent its proposal to the Office of Management and Budget, where it will be reviewed for at least two months. Then, Congress will have two months to review the proposal before it is finalized.

Supporters of the rule are counting on that happening before the end of President Obama’s final term.

Opponents of the rule are holding out hope that attempts to pass alternative legislation, which would have to survive a veto from President Obama, will at the very least bring more attention to what they argue is a proposal riddled with unintended consequences.

John Kline, R-Minnesota and chair of the Education and Workforce Committee, said the DOL’s proposal is the culmination of “an extreme partisan scheme jammed through a flawed regulatory process.”

Kline argued that the proposed alternatives strike the right balance between raising the bar on investment advice and insuring that low and middle-income Americans are not priced out of the advisory market, which DOL critics say its proposal would do.

“Are we supposed to cross our fingers and hope the (Obama) administration gets this right,” asked Rep. Kline. “The stakes are too high for Congress to sit back and do nothing.”

Rep. Jared Polis, D-Colorado, did not vote for either proposed alternative, but he did note the many concerns members from both parties have raised with the DOL’s original proposal.

Polis said he has written Labor Secretary Thomas Perez, requesting the DOL show Congress what changes were made to the proposal before it was sent to the OMB for review.

“We need to know what we are talking about before invalidating the rule,” said Polis, who previously led a failed effort to get the DOL to open another comment period so stakeholders could consider amendments made to the proposal.

In his dissent, Polis said the principal-based alternative legislation could be useful, but the “timing is not right.”

See also:

DOL’s fiduciary regs may be especially bad for insurance BDs

How DOL’s fiduciary will change the industry, and careers

Proposed DOL annuities revisions could mean big changes for advisors

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