Congress set to pass bill giving SEC a budget boost, leaving DOL fiduciary rule alone

Amendment allowing cuts to pension benefits also in play

Dec 10, 2014 @ 12:10 pm

By Mark Schoeff Jr. and Darla Mercado

Congress will vote later this week — likely Thursday — on a massive spending bill that would boost the budget for the Securities and Exchange Commission but still leave in question whether the agency has enough funding to increase investment adviser examinations.

And the fate of two potential adviser-related riders to the so-called omnibus bill also was revealed Tuesday night when the language of the bill was released. Supporters of a pending Labor Department rule that would strengthen fiduciary-duty rules for retirement plans were able to stop a provision that would have effectively killed the proposal.

Another provision that could result in cuts to retirees' pensions will be voted on as an amendment to the $1.013 trillion appropriations bill that will fund most federal agencies through September.

The legislation would allow the government to avoid a shutdown, keeping it operating beyond Dec. 11, when a temporary funding measure expires.


The heart of the appropriations bill is to provide funding for federal agencies. The SEC, with a $150 million increase, fared better than most. The $1.5 billion spending level the measure would provide for fiscal 2015 is $100 million more than House Republicans originally approved but about $200 million less than the Obama administration request.

“Overall, given the politics and gridlock on Capitol Hill, it seems the SEC came out relatively unscathed,” said Duane Thompson, senior policy analyst at Fi360, a fiduciary duty consulting firm.

In seeking its original funding request, the SEC told lawmakers that it needed the money in part to hire more investment adviser examiners. The agency currently examines annually 10% of the more than 11,000 registered advisers.

“We're pleased that the SEC was able to get some additional resources and are hopeful that some will go toward investment adviser oversight,” said Neil Simon, vice president of government relations at the Investment Adviser Association.

There are some strings attached to the money. For instance, the SEC is mandated to increase the budget for its office of economic and risk analysis by $11 million to $56.6 million. Congressional Republicans have been pushing the agency to improve its cost-benefit analysis of regulations.

“In a way, it's robbing Peter to pay Paul,” Mr. Thompson said. “In terms of investment adviser inspections, I don't think the SEC has a whole lot to work with to increase staff. The New Year's message for investment advisers is, don't expect to see much in the way of a change in the current inspection cycle.”

The SEC welcomed its budget boost.

“These funds are critical to the SEC’s ability to fulfill its important mission, including permitting us to increase our examination coverage and to continue to hire industry experts and modernize our technology,” the agency said in a statement. “We will continue to do our utmost to maximize the resources provided to us for the benefit of the nation’s investors and markets.”


What the bill doesn't contain — a rider that would have hamstrung the DOL rule — was a victory for those encouraging the agency to beef up investor protections for workers and retirees building their own nest eggs.

“This is an important hurdle to get over, but there's a lot more to do,” said Barbara Roper, director of investor protection at the Consumer Federation of America.

The DOL rule is designed to make more financial advisers to retirement plans act in the best interests of the clients, including brokers who sell individual retirement accounts.

The Labor Department is scheduled to re-propose the regulation, which it calls the conflicts-of-interest rule, in January. First, it must go to the Office of Management and Budget for a review that could last months.

Originally proposed in 2010, it was withdrawn after fierce industry protest. Opponents argue it would significantly increase regulatory costs and liability for brokers, forcing them to stop servicing small IRA accounts.


A last-minute congressional proposal that will allow trustees of multiemployer pension plans to reduce benefits for retirees is a step closer to being tacked onto the omnibus spending bill.

On Tuesday night, John Kline, R-Minn., chairman of the House Education and the Workforce Committee, and senior Democrat Rep. George Miller, D-Calif., announced they had reached a deal on a piece of legislation that purports to save underfunded multiemployer pension plans — and the Pension Benefit Guaranty Corp.'s safety net for those plans — by permitting trustees to cut benefits for retirees.

The deal flies in the face of objections by pension advocates and members of the retirement services industry, who called on Congress to go through the appropriate legislative channels for this issue, as opposed to adding it to the spending bill.

“I can't even think of an example of something so substantial ever being enacted into law this way,” Brian Graff, chief executive of the American Society of Pension Professionals and Actuaries, said of the proposed changes to multiemployer plans. “This isn't the way to do something as significant and as technical as this.”

On Tuesday night, Mr. Kline noted that the language will now go to the House Rules Committee, where it will be voted on to become an amendment to the omnibus spending bill.

Further, Mr. Kline noted that the DOL, the regulatory agency that oversees retirement plans, has been kept in the loop of this development.

“I spoke with [Labor Secretary Thomas E.] Perez as recently as this weekend,” Mr. Kline said. “He understands what George Miller and I have been saying. He's been helpful, and I know his staff has been involved to some degree as well. They have been included.”

Mike Trupo, a spokesman for DOL, said the agency had no comment.

The congressmen also released some details on the upcoming legislation. Mr. Miller stressed that active and retired union members have an opportunity to vote on whether their plan will take such measures.

“This is very important so that the individual members feel that they have a real say in the design of the plan and can say if they think it'll work in their benefit or not,” said Mr. Miller.

Further, the lawmakers said there would be participant protections in place for disabled retirees and those age 75 and older.

The legislation is modeled on a 2013 proposal from the National Coordinating Committee for Multiemployer Plans, called Solutions not Bailouts.

The House and then the Senate are expected to vote on the omnibus bill Thursday, though they could pass a short-term version sooner to keep the government running past its funding expiration while negotiations continue until the larger bill — with the various riders and amendments — can be passed.


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