The House Committee on Education and the Workforce approved Tuesday two bills that would replace the Department of Labor’s rule to amend the definition of fiduciary on retirement advice, which is now being reviewed by the Office of Management and Budget.
Committee Chairman John Kline, R-Minn., said at the markup that DOL is pursuing “a reckless regulatory scheme” with its fiduciary rulemaking “that will make it harder for low- and middle-income families to save for retirement.”
The bills approved Tuesday are the Affordable Retirement Advice Protection Act (H.R. 4293), introduced by Rep. Phil Roe, R-Tenn., and the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act (H.R. 4294), introduced by Rep. Peter Roskam, R-Ill.
The bills now advance to the full House.
The House Ways and Means Committee plans to mark up Wednesday the SAVERS Act, which is being led by Rep. Peter Roskam (R-Ill.). Both Roskam’s bill and the Affordable Retirement Advice Protection Act would require an affirmative vote by Congress before any final rule by the Department of Labor goes into effect.
Kline said during the Tuesday mark up that both HR 4293 and HR 4294 achieve “the same goal” as DOL’s proposal, “but in a way that doesn’t hurt small businesses and working families,” adding that he hoped lawmakers “can continue to move this bipartisan legislation forward and help more Americans retire with the dignity and financial security they deserve.”
Markup of the bills continued Tuesday despite lawmakers’ attempts to postpone the markup until lawmakers get a chance to see DOL’s final rule once released by OMB.
Rep. Jared Polis, D-Colo., said during the markup that considering the bills is “premature,” and that lawmakers “should be having this discussion after we see the final [DOL] rule.”
Polis, ranking member on the Health, Employment, Labor and Pensions subcommittee, sent a letter to OMB the same day requesting a “private and secure” viewing for himself and other lawmakers of the rule DOL sent for review on Jan. 28.
Barbara Roper, director of investor protection for the Consumer Federation of America, told Kline in a Monday letter that instead of ensuring that retirement savers who turn to financial professionals get “advice that serves their best interests,” both bills approved by the committee Tuesday “codify loopholes in the definition of fiduciary investment advice that make it all too easy for financial firms and their advisors to avoid their best interest obligations.”
Under the bills, firms would “continue to be able to use disclaimers to avoid the best interest standard simply by indicating that the advice is not intended to be relied upon or that the firm is acting in a marketing or a sales capacity,” Roper wrote. “Experience tells us that many firms will exploit these loopholes to the detriment of working families and retirees saving for a secure and independent retirement.”
Further, Roper argued, “even as they preserve loopholes that enable firms to avoid their fiduciary obligations, the bills weaken the standards that apply to advice that is subject to the bills’ so-called ‘best interest’ standards.”
HR 4293 includes “neither the duty of prudence nor the duty of loyalty that are essential core elements of a fiduciary standard,” she wrote. “Instead, the sole requirement to meet the bill’s ‘best interest’ standard is that any fees charged are reasonable.”
HR 4294 includes “a duty of prudence and a watered down duty of loyalty, but it doesn’t provide any enforcement mechanism to enable IRA investors to hold advisors accountable when they fail to meet that standard.”
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