While the resolution to block the Department of Labor’s fiduciary rule will likely make it to President Barack Obama’s desk, Rep. Phil Roe, R-Tenn., conceded Tuesday afternoon that the president will veto it and the industry “will be stuck” with DOL’s rule.
At an event held on Capitol Hill by the U.S Chamber of Commerce, Roe, chairman of the Subcommittee on Health, Employment, Labor and Pensions, said that following the House Rules Committee meeting Wednesday afternoon, the rule for the resolution, HJ Res. 88 – which passed the House Education and the Workforce Committee on April 21 – will be considered on the House floor Thursday.
The House is expected to debate and vote on the resolution Friday morning.
The Obama administration quickly responded the day after the Hill briefing that Obama would indeed veto the resolution and that the administration “strongly opposes H.J.Res. 88 because the bill would overturn an important Department of Labor final rule critical to protecting Americans’ hard-earned savings and preserving their retirement security.”
The Office of Management and Budget said that “outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interest when giving retirement investment advice. Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns — costing American families an estimated $17 billion a year.”
Despite the inevitable veto of such legislation – the Senate has also introduced a similar resolution – Roe, along with Rep. Peter Roskam, R-Ill., a member of the House Ways and Means Committee, vowed at the Hill briefing to continue to fight DOL’s rule, arguing that the rule will have long-term consequences that will devastate retirement savers.
“We’ve got to be clear minded and understand this is a fight worth having. It’s not an overcharacterization to say that this [DOL fiduciary rule] is Obamacare, essentially, on the retirement system,” Roskam said. “It’s an aggressive characterization, but it’s not an overcharacterization.”
Roskam noted that he is “disappointed” with the final rule, adding that while DOL “made some things different, I don’t think substantively it’s that different in terms of how it’s going to be implemented.”
OMB stated Wednesday, however, that the final DOL rule “reflects extensive feedback from industry, advocates, and members of Congress, and has been streamlined to reduce the compliance burden and ensure continued access to advice, while maintaining an enforceable best-interest standard that protects consumers. It is essential that these critical protections go into effect.”
Roskam argued at the briefing that the “long-term impact of the rule is, unfortunately, that people at the lower end of the food chain are going to get less advice.”
If the final rule “is not dealt with” either by statute or other means, “then what we’ll see over a period of time is a self-fulfilling prophecy: What happens with less advice is more diminished returns and over a period of time what happens is a wider and wider [savings] gap.”
Roe introduced the Affordable Retirement Advice Protection Act (H.R. 4293), which was approved by the education and work force committee on Feb. 2 along with the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act (H.R. 4294), introduced by Roskam. Both bills seek to replace DOL’s conflict of interest rule.
Roe said at the Tuesday afternoon event that given that the full compliance date with DOL’s rule isn’t until January 2018, “it will probably be 2020 before you really start to see the effects of it.”
The 1,000 page rule is a “trial lawyer’s dream,” Roe said, and “somebody has to pay somebody for crawling through that rule.”
If re-elected, “I will be on the same subcommittee and we will focus on this [rule] like a laser beam,” Roe continued. “I think it’s going to be a major problem.”
The resolution, H.J. Res. 88, was introduced on April 19 and co-signed by Rep. Ann Wagner, R-Mo., along with Roe and Rep. Charles Boustany, R-Louisiana, chairman of the Subcommittee on Tax Policy.
Aliya Wong, the Chamber’s executive director of retirement policy, noted at the event that while Chamber is still reviewing DOL’s final rule, the initial review is that the rule is “very complex.”
Consequently, she said, “it will be years before we realize the full impact of the rule.” While Chamber “supports a best interest standard, this rule will have unintended consequences.”
– Check out DOL Fiduciary Means Higher Costs, Robo Exploration: Raymond James Exec on ThinkAdvisor.