As expected, President Barack Obama on Wednesday vetoed resolutions passed by the House and Senate to kill the Department of Labor’s rule amending the definition of fiduciary under ERISA.
“I am returning herewith without my approval H.J. Res. 88, a resolution that would nullify the Department of Labor’s final conflict of interest rule,” Obama said. “This rule is critical to protecting Americans’ hard-earned savings and preserving their retirement security.”
Rep. Phil Roe, R-Tenn., chairman of the Health, Employment, Labor, and Pensions Subcommittee, and House Education and the Workforce Committee Chairman John Kline, R-Minn., denounced Obama’s veto of the joint resolution of disapproval under the Congressional Review Act.
“This veto threatens the retirement security of millions of working families,” Roe said. “The flawed fiduciary rule will make it harder for low- and middle-income workers to save for the future, limit the ability of individuals to receive basic financial advice, and jeopardize the creation of small business retirement plans.”
Obama, Roe continued, “is apparently willing to accept these painful consequences, but Republicans are not. We’ll continue to do everything in our power to protect access to affordable retirement advice for every American.”
Meanwhile, the U.S. District Court for the District of Columbia has set August 25 as the date to hear the recent suit against DOL brought by the National Association for Fixed Annuities. The lawsuit seeks a preliminary injunction to stay the rule, which is currently scheduled to become operational in April 2017.
NAFA’s lawsuit alleges the DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and that it improperly categorizes insurance agents as fiduciaries.
Nine plaintiffs including the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute, the Financial Services Roundtable, the U.S. Chamber of Commerce, the Insured Retirement Institute and four Texas groups, including the Texas Association of Business, filed a similar lawsuit on June 2 in the U.S. District Court for the Northern District of Texas.
DOL has 60 days to respond to the lawsuit.
Labor Secretary Thomas Perez has stated that DOL’s rule is “built upon solid statutory and legal foundations, and we will defend it vigorously.” The “handful of industry groups and lobbyists are suing for the right to put their own financial self-interests ahead of the best interests of their customers.”
Eugene Scalia, a partner in Gibson, Dunn & Crutcher’s Washington office, who represents the groups, stated on a June 2 call that the DOL rule’s impact “is nationwide, but it’s very great in Texas. It’s appropriate that [the lawsuit be filed] in a Main Street jurisdiction; it’s not an inside the Beltway case.”
As to DOL’s 60-day deadline to respond, Scalia, who previously served as DOL’s chief legal officer and is the son of the late Supreme Court Justice Antonin Scalia, told ThinkAdvisor that “We expect to seek a means fairly promptly to be resolved in advance of the [April] compliance deadline.”
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