Congress Fails in Effort to Slow Fiduciary Rule Process

Congress reached an agreement on a budget deal that did not include riders that would have changed the process of the Department of Labor’s proposal to change the definition of fiduciary advice under the Employee Retirement Income Security Act (ERISA).

Several groups are concerned with where the proposal is heading, what’s in it and how fast it’s moving. One group wants to defund the DOL initiative, while another group is suggesting the DOL be required to re-propose the rule with a short comment period next year, which would impact the timing of the issuance and effective date of the rule and give interested parties an opportunity to see how the DOL is resolving concerns raised during the first comment period.

It was speculated that the budget deal was an example of must-pass legislation, so the president would likely sign it and not veto it. However, Fred Reish, a partner in Drinker Biddle’s Employee Benefits & Executive Compensation Practice Group, chair of the Financial Services ERISA Team and chair of the Retirement Income Team, had said he wasn’t so sure the budget deal will bring a change to the fiduciary rule process. “My view is that Republicans will focus more on issues such as defunding Planned Parenthood or limiting Syrian refugees,” he says. “Looking at the politics of today, those issues are greater hot buttons than the fiduciary rule, and I can’t imagine the president not vetoing a bill that has that kind of stuff in it.”

NEXT: Mixed reactions from industry groups

In a statement, the Financial Planning Coalition—comprised of the Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA)—voiced support for not delaying the DOL re-proposed rule on fiduciary.

“The Financial Planning Coalition applauds Congressional leaders in standing up for American investors by resisting attempts to halt or delay the Department of Labor’s (DOL) rulemaking to require financial advisers to put their clients’ interests first when providing advice related to retirement savings. Retirement investors need—more than ever—un-conflicted advice that is in their best interests. Now, by agreeing on a funding bill without the rider, and allowing the DOL to proceed with its rulemaking without further delay, members of Congress can take an important step to strengthen retirement security for Americans.”

Consumer Federation of America (CFA) Director of Investor Protection Barbara Roper also issued a statement applauding the lack of a rider in the budget bill: “Financial firms have mounted one of the most aggressive lobbying campaigns in recent memory to defeat a rule that would require them to put their customers’ interests first when providing retirement investment advice. Had they succeeded in getting a policy rider included in this must-pass bill, hopes that workers and retirees would finally get the protections they deserve when they turn to financial professionals for retirement investment advice would have been dashed.”

However, groups concerned the DOL rule will have unintended consequences for retirement savers expressed a different sentiment.

Insured Retirement Institute President and CEO Cathy Weatherford, said, “Given the widespread impact the Department of Labor’s fiduciary rule proposal will have on the retirement security of millions of American savers, particularly those who are younger or of modest means, it is imperative that Congress has its say on this matter. Members of Congress, on a bipartisan basis, have echoed our concerns about the DOL’s proposal—specifically that it will impede hardworking Americans’ ability to access guaranteed lifetime income strategies that provide retirement income that cannot be outlived.”

Financial Services Roundtable (FSR) President and CEO Tim Pawlenty, also said the legislation fails to address a rule currently under consideration at the DOL that will make it harder for families to prepare for retirement. “We should do everything we can to help Americans increase their retirement savings,” he stated.  “Access to affordable retirement advice that is in a saver’s best interest has broad, bipartisan support and ensuring the DOL gets their rule right should be a top priority for Congress.”

NEXT: When the rule is expected

There are rumors that the DOL’s final rule will be issued as early as January 2016, but Bradford P. Campbell, counsel in Drinker, Biddle and Reath’s Employee Benefits & Executive Compensation Practice Group, and former head of the Department of Labor’s (DOL) Employee Benefits Security Administration, doesn’t see that as being possible considering the sheer volume of issues. “My best guess is March or April, and the eight-months proposed delay means it will go into effect before the end of 2016 and before a change in presidents,” he says.                       

Campbell notes it will be harder for the new administration to undo the rule if it’s in effect before that time, but there’s a lot of work the DOL has to do to meet that goal. Before it is published, it will have to be submitted to the Office of Management and Budget (OMB), which has 90 days to make a decision, but Campbell doesn’t think once it is passed to OMB it will take three months to get published.

A bipartisan group of lawmakers recently released principles to guide the rule and are coming up with legislation using those principles.