After a third federal court ruling in early February upheld the Department of Labor’s fiduciary rule, Labor’s Acting Secretary Edward Hugler filed in short order with the Office of Management and Budget to delay the rule’s April 10 compliance date.
Hugler’s filing came only days after President Donald Trump directed DOL on Feb. 3 to review its fiduciary rule, and if it deems appropriate, come up with a plan to revise the rulemaking.
That plan was filed in mid-February with OMB via a Notice of Proposed Rulemaking.
The notice filed at OMB did not say how long Labor plans to delay the rule’s April 10 compliance date, though it’s been widely discussed that Labor will propose a 180-day delay with a 15-day comment period on the plan.
Details of Labor’s plan won’t be revealed until OMB approves the notice, which could be published in the Federal Register by the end of February.
“I assume that the department will automatically delay that date in order to allow sufficient time to do the analysis” of the rule, said Fred Reish, a partner in Drinker Biddle & Reath’s employee benefits and executive compensation practice group in Los Angeles.
Nonetheless, Reish added, “it will be uncomfortable for the financial services sector to wait and see if the DOL actually delays the date. If the department determines that the rule does adversely affect investors or retirees, it is further directed to rescind or revise the rule, as appropriate.”
Barbara Roper, director of investor protection for the Consumer Federation of America, added that while the delay is “hardly unexpected” in light of Trump’s executive order, “it is a disappointment that this administration continues its attack on the most important improvement in investor protections in a generation.”
Three courts, she continued, “have carefully considered the rule, and all three have upheld it. Any further delay increases the cost and confusion around implementation of the rule and deprives working families and retirees of cost savings they would otherwise have enjoyed.”
In its review, the administration also told DOL to undertake an “updated economic and legal analysis of the rule, including analyzing potential harm to investors, disruptions within the retirement services industry, price increases to investors and increased litigation.”
In his executive order, Trump wrote that “one of the priorities of my administration is to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies.”
DOL’s fiduciary rule, it continued, “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my administration.”
Texas Judge Upholds DOL Rule
The court ruling in favor of the fiduciary rule came from Judge Barbara Lynn of the U.S. District Court for the Northern District of Texas.
Judge Lynn stated in her Feb. 8 ruling that “in contrast to the situations in the cases cited by Plaintiffs, in [the Employee Retirement Income Security Act] Congress did speak clearly, and assigned the DOL the power to regulate a significant portion of the American economy, which the DOL has done since the statute was enacted.”