Friday marked the last day the White House’s Office of Management and Budget accepted meetings with industry stakeholders hoping to influence the finalization of the Department of Labor’s fiduciary rule.
1. When will the DOL fiduciary rule be finalized?
That means a final rule could emerge as early as next week, but more likely by the end of the month, according to Brad Campbell, an ERISA attorney with Drinker Biddle.
Campbell and Fred Reish, who chairs Drinker Biddle’s ERISA team, addressed a conference call on the DOL rule’s potential impact.
Nearly 1,000 stakeholders participated, testament to the wide-ranging impact the rule is expected to have on advisors and service providers to workplace retirement plans and individual retirement accounts.
2. Will the DOL rule be stopped?
Several legislative efforts that would delay or defund the rule’s implementation, as well as strategies to address the rule through the appropriations process or the Congressional Review Act, are “real and substantive,” said Campbell, but stand little chance of blocking implementation of the rule.
“The likelihood that Congress can stop DOL is low,” said Campbell.
He expects more Democrats to find the rule to be problematic once it is finalized, but not enough to create the two-thirds majority needed to override a veto from President Obama, which would be all but guaranteed of any legislation Congress passes.
3. When would compliance be expected?
Campbell also said he expects the Obama Administration to waste little time making industry comply with the new rule. An end-of-year compliance date should be expected, he said.
“Obama is going to want to have a deadline in place before he leaves. That will make it much harder for the next administration to undue” the rule, said Bradford.
4. Will others try to block the rule?
While Congressional efforts to block the rule will likely prove impotent, Campbell said private lawsuits seeking to block the rule’s implementation are “a very real possibility.”
“DOL has done some things I think they lack the authority to do,” explained Campbell, who referenced a recent majority report from the Senate Committee on Homeland Security and Governmental Affairs.
That report alleged the Obama Administration was “predetermined to regulate the industry” and sought economic evidence to “justify its preferred action” in directing the DOL to write a rule that would expand the definition of fiduciary to include nearly all advisors to 401(k) plans and IRAs.
The report also claims DOL willfully ignored recommendations from the Securities and Exchange Commission, the Treasury Department and the OMB as it crafted its proposed rule.
Campbell called those arguments and others enumerated in the Committee’s report “legitimate.”
If lawsuits from stakeholders do emerge, courts may delay implementation of the rule as claims are litigated, but Campbell seemed to dissuade stakeholders from holding out too much hope for that possibility.
“No one can predict where the courts will go,” he said.