Awaiting new Labor secretary, staff takes on larger role in fiduciary rule’s fate

In Washington, it is often said that personnel is policy. When it comes to the Labor Department’s fiduciary rule, the lack of Trump administration appointees at the agency is adding to uncertainty surrounding the rule.

Fast-food executvie Andrew Puzder withdrew Wednesday as President Donald Trump’s nominee for Labor secretary less than 24 hours before his long-delayed hearing was to be held before the Senate Health, Education, Labor and Pensions Committee. On Thursday, Mr. Trump announced his new nominee, Alexander Acosta, dean of the Florida International University law school and a former U.S. Attorney for the Southern District of Florida. His confirmation process is not likely to conclude until well into March.

While the new administration tries to find its footing, the April 10 implementation date for the DOL rule, which raises investment advice standards in retirement accounts, is bearing down. A DOL proposal to delay the applicablity of the rule, likely for 180 days, has been filed at the Office of Management and Budget, whose new director, former Rep. Mick Mulvaney, was just confirmed by the Senate on Thursday. That delay proposal, not yet approved, will probably come with its own two-week comment period.

With leadership currently vacant at the top of the Labor department, the outcome of the DOL rule depends on civil service personnel at the agencies who have not been working with direction from Trump appointees and won’t be for many weeks to come. Putting together a new cost-benefit analysis could be a tricky proposition for DOL staff who just spent the last six years working on a fiduciary rule that came with a regulatory assessment that has been upheld by three court decisions so far.

What they do have in hand is a Feb. 3 memo from Mr. Trump that instructs the DOL to review the rule, which requires financial advisers to act in the best interests of clients, and to modify or rescind it if the agency determines that it harms investors or the industry. In the short-term, the DOL civil staff will likely be able to push ahead with the review, even though Mr. Acosta is not in place.

“I don’t think it affects the timing on the current process at all,” said Duane Thompson, senior policy analyst at Fi360, a fiduciary training and consulting firm. “They’re going to move rapidly on it because the industry needs to know.”

But as the staff forges ahead, the permanent DOL and OMB bureaucracy continues to listen to participants in the fiduciary debate.

Kate McBride, founding member of the Committee for the Fiduciary Standard, met with OMB staff Wednesday.

“They were receptive, engaged,” said Ms. McBride, founder of FiduciaryPath, a fiduciary consulting firm. “There are so many career folks at the agencies who have workers’ best interests at heart. But they have to do what they’re commanded to do.”

But direction only goes so far with just a memo from Mr. Trump, who himself continues to be disengaged on the fiduciary issue. During his one chance to make a comment about the rule, when he signed the memo, he invited Rep. Ann Wagner, R-Mo., a longtime opponent of the rule, to comment. He said nothing about the measure.

Yes, it’s true that just issuing the directive shows where Mr. Trump stands on the regulation, but presidential appointees — not just the secretary but also the assistant secretary for the Employee Benefits Security Administration — have to make that goal a reality at the DOL, becasuse they’re the only ones who can make the political decisions necessary to scrap the rule.

“They’re going to have to provide a reasonable basis for any changes to the current rule,” Mr. Thompson said. “Otherwise, the new administration runs a huge risk of having a court throw it out.”

Maybe we should update the old saying about Washington: Permanent personnel is policy.