Lawmakers could write legislation within days that would replace a pending Labor Department rule to raise investment advice standards for retirement accounts — and proponents might try to attach it to a bill required to keep the government open.
Last month, four House members released “legislative principles” that would form the foundation for a bill they say would ensure financial advisers act in the best interests of their clients. The measure would effectively dictate parameters for the DOL rule, killing the
proposal the agency made earlier this year.
Those principles are about to be turned into legislation, according to Rep. Phil Roe, R-Tenn., one of the legislators
working on the bill.
“That could happen in the next week,” Mr. Roe said in an interview Wednesday after he led a House Education and Workforce subcommittee hearing on the DOL rule. “We'd have to decide what's the best way to move it forward.”
DEMOCRATS TO RESIST?
One approach would be to include it in the so-called omnibus government funding bill that Congress must approve by Dec. 11 to keep the government open.
“It probably will not be standalone [legislation],” Mr. Roe said. “We may not be able to get it done next week [by itself]. That leaves the omnibus as the only other option — or defunding [the DOL rule] in the appropriations bill.”
Democrats probably will resist a rider to the appropriations bill that would deny funds to the DOL to implement the rule. It's less clear whether they would acquiesce to language in the omnibus legislation that would require the Labor Department to change or re-propose the regulation.
The DOL on Wednesday urged Congress to reject any attempts to stop its rule, which would require financial advisers to offer advice to 401(k) and individual retirement accounts that's in the best interests of the clients. The agency asserted that it has conducted an extensive comment process and would modify the rule to address concerns raised by critics.
“Ironically, the efforts by some members of Congress jettison the transparency and inclusiveness they correctly demanded, instead favoring a process of closed-door deliberations dominated by lobbyists and industry insiders,” a DOL spokesman said in a statement. “As a result, we should expect a product that is ultimately less protective of middle-class retirement savers.”
RUBRIC OF REGULATION
The Obama administration argues that the rule would shield workers and retirees from conflicted advice that raises their investing costs and erodes savings. Opponents of the rule say it foists significant litigation risk and regulatory costs on brokers and would make advice more expensive.
“I'd rather see Congress take the opportunity in the omnibus to express its concerns rather than rush headlong into a final rule that we haven't seen,” Bradford Campbell, counsel at Drinker Biddle & Reath and a former DOL official in the George W. Bush administration, said in an interview following his testimony at the hearing.
But a DOL rule advocate said Congress should stay out of the regulatory process.
“Refrain from legislating … and allow [the DOL] to promulgate its long-overdue rule,” Marilyn Morhman-Gillis, managing director of public policy and communications at the Certified Financial Planner Board of Standards Inc., told lawmakers.
Sitting next to Ms. Morhman-Gillis at the witness table, Jules Gaudreau, president of the The Gaudreau Group, said the rule would overwhelm brokers and insurance agents.
“It is a giant rubric of regulations that will be imposed upon our industry and make it more and more difficult for the regular American to get financial advice,” said Mr. Gaudreau, president of the National Association of Insurance and Financial Advisors.
The highest ranking Democrat on the subcommittee split the difference between DOL backers and industry opponents, saying the DOL would modify the rule but also calling for another comment period after the final regulation is released.
“I'm optimistic they will make the changes necessary to create a good rule,” said Rep. Jared Polis, D-Colo. “Oftentimes, a second comment period can be helpful.”
