The Department of Labor’s rule to change the definition of fiduciary on retirement advice should emerge from the Office of Management and Budget “sometime in the near future,” and the final rule will include changes, Labor Secretary Thomas Perez told members of the House Education and the Workforce Committee Wednesday.
During a hearing held by the committee on DOL’s policies and priorities, Rep. Phil Roe, R-Tenn., voiced his concern to Perez that there is “no indication that the final rule will be any different” from the one proposed in 2010.
But Perez noted the lengthy comment period the rule underwent, adding that the DOL heeded the concerns raised about designating employee stock ownership plans as fiduciaries, and removed ESOPs from the rule that’s undergoing OMB review. (Perez testified before the Senate Appropriations Committee last Thursday).
“We heard a lot of concerns about ESOPs and took them out” of the conflict of interest rule, Perez said. “Our North Star is an enforceable best interest standard,” he added, stating that DOL “has read every one of” the 300,000 comments that came in on DOL’s rule.
Rep. Matt Salmon, R-Arizona, asked Perez for assurance that under DOL’s fiduciary rule, “the law of unintended consequences” doesn’t limit access to advice for low- and moderate-income savers.
“We have a shared interest to make sure everyone has access to retirement advice,” Perez responded. “At the end of our process, we look forward to explaining the changes we made and how we intend to proceed.”
Roe introduced the Affordable Retirement Advice Protection Act (H.R. 4293), which was approved by House Workforce and Education Committee on Feb. 2 along with the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act (H.R. 4294), introduced by Rep. Peter Roskam, R-Ill. Both bills seek to replace DOL’s conflict of interest rule.
Perez stated during his Wednesday testimony that he believes the bills “move the status quo backwards” in ensuring retirement savers receive unconflicted advice.
Rep. Mike Bishop, R-Mich., asked Perez to ensure the final rule would address concerns raised about the treatment of variable annuities and “keeping [them] under the 84-24 prohibited transaction exemption,” permit commissions on sales of proprietary products, and changes to the best interest contract exemption.
Perez responded that DOL has taken the comments on those issues “seriously,” adding that “when we reach the end of the process we will explain the proposal, the changes we made and why we did what we did.”
Roe also noted results of a United Kingdom government study, released Tuesday, that confirms an investment advice gap for low- and middle-income individuals following the 2013 adoption of a rule directly banning third-party payments to advisors in connection with investment advice.