Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
By Sean Forbes
April 6 — The Department of Labor released a substantially revised final version of its controversial fiduciary rule that's intended to ensure that retirement savers get investment advice in their best interest.
At an April 6 event at which they unveiled the rule, Labor Secretary Thomas E. Perez and Democratic lawmakers who have supported the effort recognized the DOL's work isn't done yet, and that they will continue to have to defend the regulation.
“It's been a tough fight” to get the rule across the finish line, Sen. Elizabeth Warren (D-Mass.) said. “And there may be more fighting to come.”
Warren also cheered the release with a “Woo-hoo!,” which Sen. Cory Booker (D-N.J.) called the “rallying cry for the retirement security in America.”
The fight Warren mentioned is a near-guarantee. Rep. Peter Roskam (R-Ill.) continued to promote a bill (H.R. 4294)—known as the SAVERS Act—that he is sponsoring that would put into place an alternate best-interest standard and prevent the rule from taking effect unless Congress approved the changes.
“We share in the administration’s goal of raising the bar for the financial services industry by requiring advisors to serve in their clients’ best interests,” Roskam said in a statement. “We look forward to passing the SAVERS Act to root out the bad apples while also preserving access to retirement advice for all Americans, not just the wealthiest among us. The SAVERS Act is clearly the best path forward. It's bipartisan, bicameral, and better.”
The bill has little chance of being enacted. President Barack Obama has promised to veto any legislation that would thwart the rule.
Meanwhile, those both pro and con have plenty of reading ahead—the rule, including the exemptions from the Employee Retirement Income Security Act and the preambles to each component, tops 1,000 pages.
Despite the possibility of more fighting over the rule, the DOL did make significant changes that take into account the many comments and criticisms the department has heard over the past year in thousands of comment letters and four days of hearings, as well as in hundreds of private meetings with industry and consumer representatives since the department began its project in 2010.
Among the key changes to the rule, which is also known as the conflict-of-interest rule, are:
Phyllis C. Borzi, assistant labor secretary for the DOL's Employee Benefits Security Administration, said the final rule shows that the department took into account the multitudinous comments it received.
“There are two things that I hope you will take away,” Borzi told Bloomberg BNA April 5. “We listened, we made efforts to address the concerns, and we think the rule is stronger and better than the rule we proposed.”
In getting to the final rule, Borzi referred to comments that Perez had made when talking with one commenter: “ ‘If you want to make good policy, you set a big table, you let anybody who wants to come to the table to participate, you listen, and then you have humility.' ”
To Perez's comment, Borzi added, “And I think you'll see humility in this reg,” reflecting that her agency “didn't hesitate to abandon” aspects of the proposal when it heard better ideas.
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In addition to the final rule, the DOL also released guidance on the adoption of the class exemption for principal transactions in certain assets between investment advice fiduciaries and employee benefit plans and IRAs; the new best-interest-contract exemption; and revisions to Prohibited Transaction exemptions 86-128 and 75-1, 75-1, 77-4, 80-83 and 83-1, 84-24, and 75-1.
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