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New DOL Fiduciary Rule Lands at OMB

By Melanie Waddell

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What You Need to Know

  • DOL's plan would take into account practices of advisors, and the expectations of plan officials and participants, and IRA owners who receive investment advice.
  • OMB reviews can take up to 90 days.
  • DOL is plowing ahead with its latest damaging proposal despite the fact that federal courts have repeatedly rejected their efforts, said IRI's Chopus.

The Labor Department has filed its rule to amend the definition of fiduciary at the Office of Management and Budget for review.

The notice of proposed rulemaking at OMB states that the plan would “more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code.”

OMB reviews typically take 90 days.

The amendment, Labor said, “would take into account practices of investment advisers, and the expectations of plan officials and participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including in the ways advisers are compensated that can subject advisers to harmful conflicts of interest.”

In conjunction with the rulemaking, Labor’s Employee Benefits Security Administration “also will evaluate available prohibited transaction class exemptions and propose amendments or new exemptions to ensure consistent protection of employee benefit plan and IRA investors.”

Top GOP lawmakers on the Senate Health, Education, Labor and Pensions (HELP) Committee and the House Education and the Workforce Committee told Acting Labor Secretary Julie Su in a recent letter to “cease further action” on a new fiduciary rule.

Sen. Bill Cassidy, R-La., ranking member of the HELP Committee, and Rep. Virginia Foxx, R-N.C., chairwoman of the Education and the Workforce Committee, said in the letter that they oppose Labor’s continuing efforts to promulgate a rule on “Conflict of Interest in Investment Advice” to revise the definition of fiduciary under Section 3(21) of the Employee Retirement Income Security Act.

Wayne Chopus, president and CEO of the Insured Retirement Institute in Washington, said Saturday in a statement that Labor’s “decision to try again to advance a new fiduciary proposal will hurt working families’ ability to save for retirement.

“Similar to the DOL’s failed 2016 rule, which was vacated by a federal appeals court in 2018, this latest attempt will limit consumers’ choice of financial advice and access to products that can deliver protected lifetime income during retirement,” Chopus explained.

DOL, he added, “is plowing ahead with its latest damaging proposal despite the fact that federal courts have repeatedly rejected their efforts to expand the fiduciary rule in recent years.”

Susan Neely, president and CEO of the American Council of Life Insurers, said in another statement Saturday that Labor ”must not adopt a fiduciary-only regulation like it did in 2016.  First, most Americans cannot afford to engage a fiduciary investment adviser, who typically charge high, ongoing fees for their services.”

Second, Neely stated, the Securities and Exchange Commission and the states “are positioned to address conflicts of interest, the Labor Department’s main focus. In less than 3 years, 40 states have safeguarded 70% of U.S. consumers seeking a secure retirement by implementing the best interest enhancements to the National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation.”

These bipartisan measures, Neely continued, “also align with the SEC’s Regulation Best Interest (Reg BI) to provide consumers with strong state and federal protections. Combined, these actions have greatly enhanced the standards financial professionals must follow. And, they address the potential conflicts of interest the Labor Department attempted to address in 2016 without limiting access to annuities, the only financial product in the marketplace that can provide guaranteed income for life.”

Melanie Waddell

@Think_MelanieW

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