A Labor Department rule that would raise investment advice standards for retirement accounts took its last step toward finalization Thursday night.
The DOL sent the measure to the Office of Management and Budget, which indicated receipt of the regulation on its website Friday. The OMB has up to 90 days to review the rule, but is likely to expedite the process.
The OMB reviews all proposed and final rules, looking particularly at their economic consequences. After the OMB signs off, the DOL will release the final rule publicly — perhaps as early as March and likely by April.
A major financial industry trade association urged the OMB to conduct a comprehensive cost-benefit analysis of the final rule, an entreaty that could foreshadow an argument the industry would make in a lawsuit.
“The OMB has a statutory mandate to get this right,” Kenneth E. Bentsen Jr., president and CEO of the Securities Industry and Financial Markets Associatio, said in a statement. “To do so, it must fully assess the impact of the DOL’s rule to ensure it serves the best interest of American investors without making saving harder and causing undue harm.”
An advocate said that the DOL will not be able to please critics of the rule, who will continue to challenge it.
“The Department of Labor has done a pretty significant job in listening to all the stakeholders over the last five-year period,” said Christine Lazaro, associate professor of clinical legal education at St. John’s University. “To imply they haven’t fully considered the cost benefit analysis of the rule’s impact is misleading.”
The timing of its arrival at OMB indicates the DOL likely tweaked rather gutted the original proposal, said Duane Thompson, senior policy analyst at Fi360, a fiduciary duty consulting firm.
“It confirms there's going to be no wholesale overhaul of the rule, as some opponents wanted,” Mr. Thompson said. “If they were going to make substantial changes, they might have taken longer. It's largely going to be a rule that is the same proposal, with changes here and there.”
Under the proposed rule, the financial industry would have eight months for implementation, a compliance deadline that could stretch into next year.
“The administration probably wants to avoid extending [implementation] much beyond inauguration day,” Mr. Thompson said.
The controversial regulation — designed to reduce conflicts of interest for financial advisers working with 401(k) and individual retirement accounts — was
introduced last April with strong backing by President Barack Obama.
Mr. Obama and other supporters assert that requiring advisers to act in the best interests of their clients will
protect workers and retirees from being sold high-fee investment products that erode their savings. .
Opponents say the complex rule will significantly increase brokers' liability risk and regulatory costs, making advice more expensive — thereby pricing people with smaller accounts out of the advice market.
FIGHT NOT OVER
A staunch critic, Rep. Ann Wagner, R-Mo., author of a bill to halt the rule, launched an attack Thursday night before the rule's transmission to OMB had become public.
“The Department of Labor has ignored Congress, thumbed its nose at the thousands of Americans who have expressed concerns about the impact this rule will have on family savings and jobs, and has charged blindly forward with this executive overreach,” Ms. Wagner said in a statement. “This fight is far from over.”
The DOL has
conducted two comment periods, which generated thousands of letters, and held four days of hearings in August. It is now trying to complete the rule before the end of the Obama administration.
After a final rule is published, Congress will have 60 legislative days to adopt a joint resolution of disapproval, if it opposes the regulation.
