Discontent with DOL Proposal Still Simmering

The omnibus spending bill to fund the entire government is nearing its final stages—the due date is December 11—and one section might well address the fiduciary proposal by the Department of Labor (DOL).

Using the bipartisan legislative principles to govern retirement advice released in November as a springboard, the House Subcommittee on Health, Employment, Labor and Pensions (HELP) held a hearing about these principles and their place in retirement advice.

Brad Campbell, counsel at Drinker Biddle & Reath LLP and former assistant secretary for employee benefits security at the DOL, gave testimony at the hearing, praising the principles as expanding access to advice while protecting investors.

One of the takeaways from the hearing, Campbell tells PLANADVISER, is the bipartisan concern in Congress that the DOL’s proposal has some serious problems. “The question will be, does that translate into Congressional action in the upcoming omnibus bill?” he says.

Possibilities range from defunding the DOL’s ability to pursue the rule to asking for another round of comments, to rifle-shot bits of legislation that would direct the DOL to do or not do certain things, Campbell says, noting the DOL’s fiduciary proposal is just one of many issues.

“The key takeaway is there’s bipartisan interest in where the DOL is going, and how they are they going to get there,” he says. That interest could translate into some changes in the proposal as it now stands.

NEXT: Proposal hinders effective retirement planning, lawmaker says

Many workers rely on financial advisers to help them save for a sustainable retirement, according to Representative Phil Roe (R-Tennessee), because retirement security is a complicated process. “As policymakers, we should be doing everything we can to ensure workers are able to effectively plan for life after leaving the workforce,” Roe said in the hearing. “Unfortunately, we’re here today because a proposal from the [DOL] is threatening to make it harder for workers to do that.”

Rachel A. Doba, president of an Indiana engineering firm with 15 employees, said in testimony she maintains a 401(k) plan for her workforce, working with the same adviser since 2011. “He is a trusted part of my team,” she said. “Not only do I trust him to help me with implementing and maintaining my retirement plan, but also my employees trust him to provide educational materials that will help them make sound financial decisions. I am convinced that without the financial adviser most of my employees would not participate in the 401(k) plan and would not receive the benefit of the matching contribution.”

Jules Gaudreau, president of the National Association of Insurance and Financial Advisors, expressed approval of a bipartisan legislative alternative to the DOL proposal, saying it would “protect retirement savers’ investment choices, their access to professional advice and education, and their hard‐earned savings.”

But Marilyn Mohrman-Gillis, managing director of public policy and communications of the Certified Financial Planner Board of Standards, registered support for the DOL’s fiduciary proposal, calling the department’s process fully open and comprehensive.

NEXT: The DOL defends its process

“The re-proposed rule is fully consistent with the principles of a true fiduciary standard under ERISA [Employee Retirement Income Security Act],” Mohrman-Gillis said. “Congressional intervention in the DOL rulemaking process is unnecessary and will only serve to delay or derail this long overdue reform needed to protect and preserve Americans’ retirement savings.”

Campbell said the hearing addressed substantive issues and was a good opportunity for members to understand where the problems are. “The notion that it’s either the DOL approach or nothing,” he said. “The hearing illustrates there are other alternatives. Seems to me there’s bipartisan concern that while the DOL has held a lot of hearings and gotten a lot of comments, we don’t know where they are going to end up.”

In a statement shared with PLANADVISER and other media outlets, the DOL reiterated its position on the fiduciary proposal as written. “The cost of continued inaction is too high: conflicted retirement advice costs Americans $17 billion per year,” says a DOL spokesman, emphasizing the more-than-five years’ effort that the department has put into addressing the problem, including “substantial outreach, thousands of comments, four days of public hearings, and conducting over a hundred meetings with a variety of stakeholders.”

Ironically, said the DOL spokesman, the efforts by these members of Congress “jettison the transparency and inclusiveness they correctly demanded, instead favoring a process of closed-door deliberations dominated by lobbyists and industry insiders.” The result would be a product that is “ultimately less protective of middle-class retirement savers.”

The spokesman also criticized the bipartisan effort for undermining public confidence in the rulemaking process. Instead, the DOL spokesman said, “members of Congress who are genuinely interested in protecting the savings of America’s workers should wait to see the results of the Department’s incredibly open and thorough process before proposing legislation on this issue.”