WASHINGTON (Legal Newsline) - A group of 40 House Democrats argue the U.S. Department of Labor’s controversial new fiduciary rule should be implemented without delay.
California’s Maxine Waters, ranking member of the House Committee on Financial Services; Virginia’s Robert “Bobby” Scott, ranking member of the House Committee on Education and the Workforce; and Maryland’s Elijah Cummings, ranking member of the House Committee on Oversight and Government Reform lead the group of Democrats.
In their letter to Acting Secretary of Labor Edward Hugler on Friday, the lawmakers expressed their “strong opposition” to the proposed delay of the DOL rule, also known as the “conflict of interest” rule.
The DOL released its final rule in April 2016. The 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.
However, the DOL said earlier this month it would move forward -- under the direction of President Donald Trump -- with its efforts to delay the April 10 applicability date of the new rule.
The department said under its proposal the applicability date of the rule and related exemptions would be extended to June 9.
“The proposed extension is intended to give the department time to collect and consider information related to the issues raised in the memorandum before the rule and exemptions become applicable,” according to a DOL news release.
The DOL’s proposal was published in the March 2 edition of the Federal Register. The department said it would accept public comments on the proposed extension for 15 days following its publication.
The department’s announcement follows Trump’s memorandum, issued Feb. 3, directing the DOL to review the rule and determine whether it may “adversely affect” the ability of Americans to gain access to retirement information and financial advice.
Comments on issues raised in the presidential memorandum will be accepted for 45 days, according to the DOL.
But federal lawmakers contend the department should reconsider its proposed delay and “protect workers’ hard-earned retirement savings” by implementing the rule on schedule.
“For far too long, certain unscrupulous financial advisers have been able to put their own financial interests and profit motives ahead of their retirement clients’,” they wrote Hugler last week. “This insidious practice -- known as providing conflicted advice -- costs retirement plan participants an estimated $17 billion annually.
“The fiduciary rule is a responsible solution that will ensure workers and families get unbiased advice when investing their hard-earned retirement savings.”
The lawmakers point out that the DOL, under former President Barack Obama, spent six years researching, considered more than 300,000 comments, and held four days of hearings plus hundreds of various meetings before issuing the final rule last year.
“It is unacceptable that now -- roughly a month before implementation of the final rule is scheduled to begin -- the DOL is carelessly proposing to delay it,” they wrote. “Workers and retirement savers deserve better and have waited long enough.
“We believe it is imperative the final rule is implemented on schedule and without delay.”
Last month, the Office of Management and Budget -- which, according to its website, serves the President in overseeing the implementation of “his vision across the Executive Branch” -- designated the rule’s delay “economically significant.”
Still, some argue the move to delay the rule is a smart one.
John Berlau, a senior fellow at the Competitive Enterprise Institute, a self-described “non-profit libertarian think tank, praised the decision. Berlau has been an outspoken critic of the rule from the start.
“The Trump administration is on a path to help American savers and investors with a new plan to delay the Obama Labor Department’s fiduciary rule, the most expensive regulation from the Obama administration last year,” he said earlier this month. “The fiduciary rule threatens the loss of access to investment advice and choices for millions of middle-class savers by making it too expensive and legally risky to do business with lower-dollar investors. For those reasons, too, the fiduciary rule threatens the livelihoods of thousands of Main Street brokers and insurance agents.
“Meanwhile, Congress never even intended for the Department of Labor to have that kind of power over financial professionals such as brokers, custodians, and insurance agents.”
The Financial Services Roundtable agreed, saying it was “encouraged” by the DOL’s proposal to delay the rule.
“FSR believes a best-interest standard should be implemented for all investment accounts and that financial professionals should act in the ‘best interest’ of their customers,” CEO Tim Pawlenty said earlier this month. “But such a requirement should be implemented without miles of bureaucratic red tape.
“The DOL’s rule will lead to fewer retirement savings choices for many Americans and we are encouraged the DOL is proposing to delay this rule.”
As of Monday, the DOL received 565 public comments on its delay proposal. The comment deadline was Friday.
Among those filing comments were the Securities Industry and Financial Markets Association, the Financial Services Roundtable and the U.S. Chamber of Commerce -- all of which are plaintiffs in a lawsuit filed against the DOL over its new rule.
The U.S. Chamber’s Institute for Legal Reform owns Legal Newsline.
The industry groups filed comments last week in favor of the 60-day delay.
The same industry groups filed an appeal, late last month, with a federal appellate court over a Texas federal judge’s decision to uphold the rule.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.