WASHINGTON (Legal Newsline) - A Republican Congressman from South Carolina has introduced legislation that would delay the implementation of the U.S. Department of Labor’s controversial new fiduciary rule.
U.S. Rep. Joe Wilson introduced the Protecting American Families’ Retirement Advice Act Friday.
The legislation would provide for a two-year delay of the fiduciary rule’s effective date.
The DOL released its final rule in April. The rule, sometimes referred to as the conflicts of interest rule, mandates financial professionals who service individual retirement accounts, including IRAs and 401(k) plans, to serve the “best interest” of the savers and disclose conflicts of interest.
The final rule is set to take effect in part by April 2017, with full implementation set for January 2018. Under Wilson’s legislation, the rule would be delayed until 2019.
“The Department of Labor’s fiduciary rule is one of the most costly, burdensome regulations to come from the Obama Administration. Rather than making retirement advice and financial stability more accessible for American families, they have disrupted the client-fiduciary relationship, increased costs, and limited access,” Wilson said in a statement.
“This legislation will delay the implementation of this job-destroying rule, giving Congress and President-elect Donald Trump adequate time to re-evaluate this harmful regulation.”
Wilson’s legislation has the backing of various insurer and financial advisor groups.
The Financial Services Roundtable, which is challenging the rule in court, said it believes policymakers should do “everything they can” to help Americans be more prepared for retirement and not create “red tape” that makes saving for retirement more difficult.
“FSR strongly supports requiring companies to act in their customers’ ‘best interest,’” FSR CEO Tim Pawlenty said. “That’s just common sense. However, the current rule is overly complex, involves too much red tape, and is already negatively impacting consumer choice and service.
“Rep. Wilson's bill will allow time for a less bureaucratic ‘best interest’ standard to be developed.”
Dirk Kempthorne, president and CEO of the American Council of Life Insurers, agreed.
“We thank Congressman Wilson for his leadership in introducing legislation acknowledging the need for immediate action to extend the April 10 compliance deadline of this rule,” he said.
Cathy Weatherford, president and CEO of the Insured Retirement Institute, said her group has “long-standing concerns” about the rule and its “harmful impact” on retirement savers.
“A delay is much needed and will provide more time to policymakers to reevaluate it and protect consumers from its negative consequences,” she said.
Paul Dougherty, president of the National Association of Insurance and Financial Advisors, said his group remains concerned that the DOL’s final rule will reduce consumers’ access to “honest, valuable” information and advice from financial professionals.
“A delay provides time for the new administration to conduct a thoughtful and appropriate review and to work with stakeholders toward public policies that help Americans achieve their financial and retirement security,” he said.
Kenneth Bentsen Jr., president of CEO of the Securities Industry and Financial Markets Association, or SIFMA, said it would be “prudent” to allow the new Congress and administration to review a better course to protect investors.
Various trade associations and financial servicing companies have filed lawsuits against the DOL rule in the last year.
But efforts to do away with the rule have fallen short.
In late June, the U.S. House of Representatives failed to override a presidential veto of H.J. Res. 88, a resolution that would have nullified the DOL’s final rule.
President Barack Obama vetoed H.J. Res. 88, calling the rule “critical” to protecting Americans’ savings and retirement security.
“The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interests when giving retirement investment advice,” he said in a statement. “Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns -- costing America’s families an estimated $17 billion a year.
“The Department of Labor’s final rule will ensure that American workers and retirees receive retirement advice that is in their best interest, better enabling them to protect and grow their savings.”
But Donald Trump’s victory in November, along with a Republican-controlled Congress, has given some financial groups hope that the DOL rule is in play.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.