Democratic lawmakers indicated Wednesday they will oppose legislation to halt a Labor Department rule that would change investment advice standards for retirement accounts. Even Democrats who backed a similar bill two years ago said at a House Financial Services Committee hearing they will not be on board this time.
The legislation, written by Rep. Ann Wagner, R-Mo., would require the DOL to stop work on its proposal, which is designed to reduce conflicts of interest for brokers, until the Securities and Exchange Commission has acted on a similar rule for all retail investment advice. The SEC is only in the beginning stages of considering its own rule.
Rep. Gwen Moore, D-Wisc., was one of 13 Democrats who supported the previous version of the bill in committee and among 30 who voted for it on the House floor.
But she said the landscape has changed since then.
Two years ago, Congress was reacting against DOL's original proposal. The agency proposed a revised rule in April with strong White House backing, while the SEC's fiduciary initiative has been stalled for years.
The author of a recent letter signed by 96 House Democrats calling for changes to the proposal, Ms. Moore said she has met “numerous times” with Labor Secretary Thomas Perez. She expressed confidence that the DOL is listening to concerns and will modify the rule.
“The comment period has been extensive,” Ms. Moore said at the hearing. “What is the point of stopping the rulemaking in its tracks?”
Rep. Carolyn Maloney, D-N.Y., also said the DOL has gone out of its way to seek input.
“They have extended the comment period several times,” she said.
On Wednesday afternoon, the committee approved the measure, 34-25, with one Democrat voting in favor, Rep. David Scott, D-Ga. The bill now heads to the House floor.
Republicans lawmakers portrayed the DOL rule as regulatory overreach that is on a fast-track for finalization before the end of the Obama administration. They warned it would raise regulatory costs for brokers and force them to curtail advice to investors with modest assets.
Committee Chairman Jeb Hensarling, R-Texas, said the DOL standard would make advice more expensive for small savers.
“Now it's more important than ever that we save the rights of low- and moderate-income Americans to be able to save and [achieve] their financial independence,” he said.
The bill's author, Ms. Wagner, agreed.
“Writing letters and having contentious meetings with Secretary Perez and closed-door meetings telling industry and their customers what they may want to hear will not help millions of low- and middle-income Americans keep their access to their financial advice,” she said. “It is time — past time — for action.”
But the ranking Democrat on the committee, Rep. Maxine Waters, D-Calif., said the DOL rule would prevent conflicted investment advice that would cause low-income people “to lose their meager savings.”
“Whose side are you on?” Ms. Waters said. “If you're going to err, you should err on the side of the least of these.”
While Ms. Wagner's bill was being considered, a House Ways and Means subcommittee was holding a separate hearing on the DOL rule, featuring industry opponents and consumer-group supporters evaluating the measure.
