A group of 30 House Democrats has warned Labor Secretary Thomas Perez that a pending rule that would raise investment advice standards for retirement-plan advisers could hurt investors with modest assets.
In a Jan. 13 letter, members of the New Democrat Coalition asked Mr. Perez to meet with them before the DOL moves to the final stage of preparing the rule. On its regulatory calendar, the agency has indicated that it will release the regulation for comment in August.
“As you consider the path of any proposal, and before you send any proposal to the Office of Management and Budget, we respectfully request the opportunity to have a dialogue on how to best protect low- and middle-income individuals and small business, while ensuring access to investment education, information, and affordable investment products and services,” states the letter, which was signed by Reps. Rush Holt of N.J., Carolyn McCarthy of N.Y., Ron Kind of Wisc., Patrick Murphy of Fla. and 26 other House Democrats.
The letter has been posted on the website of the Financial Services Institute, which is helping lead opposition to the DOL rule.
Groups on the other side of the debate say that the House Democrats have been misled.
“These legislators are being sold a bill of goods by the financial industry,” said Karen Friedman, executive vice president of the Pension Rights Center. “These are the same arguments we've been hearing forever from industry, and they're wrong. [The lawmakers] may not realize that what they're doing is stopping the Department of Labor from protecting workers and retirees.”
The Pension Rights Center is part of a network advocating for the DOL fiduciary-duty rule that also includes AARP, the AFL-CIO, the Consumer Federation of America and Americans for Financial Reform.
Mr. Perez has been meeting with Democrats over the last few weeks to assuage their concerns.
“He's being cautious; he's being careful,” said Mary Wallace, senior legislative representative for AARP. “He is determined to get this right. They need to be more confident he is listening.”
The lawmakers also asserted that the DOL needs to coordinate with other regulators so that its fiduciary-duty rule does not conflict with what other agencies are doing. The Securities and Exchange Commission is considering a rule that would raise standards brokers must meet when providing retail investment advice.
The DOL rule would extend the “fiduciary” label to more professionals who provide advice on retirement plans. The agency said that it is trying to protect workers and retirees from conflicted advice as they build their retirement nest eggs through 401(k) plans and individual retirement accounts.
The original proposal was withdrawn in 2010 following backlash from the financial industry. Critics asserted that the rule would increase regulatory costs for brokers selling IRAs, potentially driving them out of the market for middle-income investors.
The New Democrat Coalition letter is the latest effort by Capitol Hill Democrats to slow down the DOL's fiduciary-duty rule. A group of Democratic senators sent a similar letter to Mr. Perez in August.
Some of the lawmakers who signed the Jan. 13 letter opposed a Republican-sponsored bill in October that would have forced the DOL to delay its fiduciary-duty rule until the SEC moved ahead with its own measure. An industry lobbyist said that the letter was a way for the New Democrat Coalition to express its reservations short of voting for the GOP bill, which drew a veto threat from the Obama administration.