The Labor Department Thursday dismissed a legislative effort that would replace a pending agency rule to raise investment-advice standards for retirement accounts.
Last week, bipartisan lawmakers — Reps. Richard Neal, D-Mass., Peter Roskam, R-Ill., Phil Roe, R-Tenn., and Michelle Lujan Grisham, D-N.M. — announced that they were working on the legislation out of concern that the DOL rule, which is designed to reduce financial advisers' conflicts by requiring them to act in their clients' best interests, would have “unintended negative consequences” for people with modest assets.
The DOL made clear that it has no intention of letting the bill, which has not yet been introduced, influence its rulemaking process.
“Make no mistake, this effort would establish a best-interest standard in name only and undermine the Obama Administration's efforts to protect the retirement savings of America's working families,” a DOL spokesman said in a statement emailed to InvestmentNews.
'PUZZLING AND DISAPPOINTING'
The DOL spokesman added: “It is puzzling and disappointing that after the department's five-year extensive and inclusive outreach process, Congressman Neal would embark on a closed-door initiative — in partnership with Republican leadership and a select few from Wall Street — that lacks the inclusiveness and thoroughness he and others have called for.”
A spokesman for Mr. Neal was not immediately available for comment.
The Labor Department introduced the regulation in April with the strong backing of the White House, which says it is central to its “middle class economics” agenda.
The proposal has gone through two comment periods and four days of hearings. A final rule is expected early next year so it can be finalized before the Obama administration leaves office in early 2017.
The administration says that new advice rules for 401(k) and individual retirement accounts are needed to protect workers and retirees from high-fee products that erode their savings.
The financial industry is calling for DOL to re-propose the rule. It says that in its current form the rule would significantly increase liability risk and regulatory costs for brokers, making advice more expensive to give and receive.
In a statement last week, the legislators voiced industry's concern that the DOL rule would harm investors with small retirement accounts by pricing them out of the advice market.
They were not assuaged by DOL's repeated assurances that it would modify the rule to address concerns about its complexity that have been raised by Republicans and Democrats.
“We acknowledge that the Department of Labor's pledge to change aspects of the regulation before final issuance, but feel more must be done to adequately address concerns about the rule's impact on the ability of low- and middle-class families to save for retirement,” the lawmakers said in a joint statement.