The Department of Labor is confident that its just-released rule to amend the definition of fiduciary under the Employee Retirement Income Security Act will survive legal challenges, the two top architects of the rulemaking said Wednesday.
“Every rule we take, people threaten us with litigation,” Labor Secretary Thomas Perez told reporters on the sidelines of the event to announce release of the final rule at the Center for American Progress in Washington. “We had a very lengthy and deliberate process, and what people see when they review the rule is that we listened and made changes. I’m confident in what we’ve done on the policy front, and I’m confident that we will survive any legal challenge.”
Perez also said that he believed the number of opponents to the rule would actually shrink over the course of the compliance timeline, which was extended from eight months to one year.
“The volume of opponents I think is going to shrink because they are on the wrong side of the debate and are on the wrong side of history, on the wrong side of the American people, and are on the wrong side of Main Street,” Perez said.
Phyllis Borzi, assistant secretary of Labor for DOL’s Employee Benefits Security Administration, agreed in comments to reporters that DOL is “confident that we have put together a rule that will survive legal challenges.” However, she said, “people have a right to” challenge the rule in the courts. “That’s the American way.”
Borzi, who has been the main architect of the rule but turned over public statements about the rulemaking to Perez over the past couple years, said she knew getting the rule finalized “was going to be a difficult haul.” But, she said, “it was the right thing to do.”
Added Borzi: “Whatever the slings and arrows we took along the way, this is worth it. But we’re not finished.”
After six years of working to get the rule completed, Borzi said that DOL will now turn to helping firms comply with the rule. “The process is just beginning because there will be lots and lots of questions that will come,” she said. “My staff is prepared to help people to comply; compliance is going to be the mode that we’re going to be in from now on.”
(Check out The ABCs of the DOL Fiduciary Rule on ThinkAdvisor.)
DOL extended the compliance deadline from eight months to one year “to balance the need to get the protections in place as soon as possible with the practicalities of how long it would take people to implement this” rule, Borzi said.
The new rule also includes a phased-in implementation so firms will have until Jan. 1, 2018 to come into full compliance.
She added that under the new rule, “people will have to create new policies and procedures, new compensation arrangements perhaps, develop new products.”