DOL Rule Under Two-Pronged Congressional Attack

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

Dec. 2 — House lawmakers are taking a two-pronged attack in an attempt to prevent the Department of Labor from finalizing its proposed conflict-of-interest rule: by throttling the DOL's funding and by introducing their own “best interest” financial advice bill.

Among the slew of potential riders that could be attached to the federal omnibus budget bill that Congress is aiming to pass the week of Dec. 7 is one that would prevent the DOL from finalizing or enforcing its proposed fiduciary rule. Rep. Phil Roe (R-Tenn.), chairman of the House Education & the Workforce Health, Education, Labor and Pensions Subcommittee, told Bloomberg BNA Dec. 2 after a subcommittee hearing on the proposal that it's within Congress's “power of the purse” authority to shut down the rule by controlling the DOL's budget. “[A]nd we have a tool to do that—it's called ‘omnibus,' ” he said.

Roe also said he's working on a bill setting a best-interest standard for financial advice based on principles announced in November by a small bipartisan team spearheaded by Rep. Peter Roskam (R-Ill.) and Rep. Richard E. Neal (D-Mass.).

When asked how many representatives have signed onto the yet-to-be-introduced bill, Roe said he couldn't give a total number because he's still working with Neal's office to hammer out the legislative language.

The idea of attaching an anti-fiduciary-rule rider to the federal appropriations bill in the House has been floated since at least November.

The Senate has also signaled its intent to choke the DOL's rulemaking by controlling the agency's budget. In June, the Senate Appropriations Committee on a party-line vote approved annual spending legislation to reduce the DOL's funding and block the conflict-of-interest rule.

Some Support for Fiduciary Rule

But there is support for the fiduciary rule (RIN 1210-AB32) in Congress, the vast majority of which comes from Democrats. The ranking member of the HELP subcommittee, Jared Polis (D-Colo.), said during the hearing that he's in favor of the rule, although he qualified his support by saying he wants the DOL to re-propose the rule for a brief period before moving to finalization, which he said could be done before the end of President Barack Obama's administration. Polis and a group of 46 other Democrats sent a letter to the DOL in October requesting a 15- to 30-day additional comment period.

Rep. Ruben Hinojosa (D-Texas), who didn't sign the Polis letter, told Bloomberg BNA after the hearing that a recent conversation with a financial adviser brokerage firm illustrated for him the importance of the DOL's proposal. The adviser, which at first he declined to name, had recommended a proprietary product “equalized” with the Standard & Poor's 500 Index, but had a fee cost of 1.5 percent of assets, he said.

And who was the adviser he spoke with?

After a pause, Hinojosa said, “I don't want to mention Morgan Stanley by name, but,” and then left the sentence at that. However, he said that other firms charge much less than 1 percent, and that fees of 2 percent can whittle an investor's account by about half over the typical investment period.

Morgan Stanley's fees aren't a secret. Redwood City, Calif.-based Personal Capital Corp. estimated the brokerage's total average annual fees at 1.63 percent, which it said would cost nearly $769,000 over a 30-year investment period for an average portfolio size of $500,000. That fee average was near the middle of the pack of 11 firms cited in the report, in which Merrill Lynch led the way at 1.98 percent.

By Sean Forbes

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Phil Kushin at


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