Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
By Sean Forbes
April 28 — The House passed a resolution on a party-line vote of 234-183 that would block the Department of Labor's fiduciary rule from taking effect.
“We have taken an important step in protecting access to affordable retirement advice and helping more Americans retire with financial security and peace of mind,” Rep. Phil Roe (R-Tenn.), chairman of a House Education and the Workforce subcommittee, said in a statement after the April 28 vote.
However, President Barack Obama has already promised to veto the measure if it gets to the White House.
After a Democratic caucus meeting held earlier in the day, House Minority Leader Nancy Pelosi (D-Calif.) told reporters that she was pushing for a unified Democratic “no” vote on the resolution, saying that the DOL had listened to its critics, including those from Capitol Hill, and had released a “greatly improved final rule.”
The regulation, which the DOL calls the conflict-of-interest rule, requires financial advisers to retirement investors to put their clients' interests ahead of their own. Administration officials say that the tougher requirements on advisers will protect millions of retirement savers from conflicted investment advice that results in losses of $17 billion annually.
The DOL released the final version of the rule on April 6 .
Labor Secretary Thomas E. Perez, who also addressed the reporters, said the guarantee of a veto means that it's “frankly, a waste of time, what the Republicans are doing. And what they should be doing is working with average Americans to help make sure they can save for their retirement.”
Rep. Robert C. Scott (D-Va.), ranking member of the House Education and the Workforce Committee, said the financial industry has given the rule (RIN 1210-AB32) “rave reviews,” and is “congratulating the Department of Labor for considering all their ideas” while also preserving the best interests of their clients.
However, the day before the vote, eight industry groups sent a letter addressed to House Speaker Paul D. Ryan (R-Wis.) and Pelosi opposing the rule, saying that because four other federal agencies, as well as state agencies, are responsible for regulations in the financial advice industry, “compliance will be extremely complicated and expensive, resulting in increased consumer costs that will limit the services available to many modest-income investors.” The groups also said that the DOL exceeded the authority that Congress granted it under the Employee Retirement Income Security Act.
Another coalition of 31 groups, spearheaded by the Washington-based Competitive Enterprise Institute, submitted a letter on the day of the vote, also supporting the resolution. Separately, the U.S. Chamber of Commerce also urged Congress to pass the resolution, as an individual group and as organizer of a coalition of more than 400 organizations.
DOL supporters also weighed in.
“The Department of Labor did a masterful job addressing concerns about the rule’s ‘workability' while retaining its core investor protections,” Barbara Roper, director of investor protection for the Consumer Federation of America, told Bloomberg BNA. “The unanimous opposition to the resolution from House Democrats is testimony to that fact. The biggest winners will be middle-income retirement savers who are most likely today to get advice that is not in their best interests. When all financial professionals are required to act in their customers’ best interests, these smaller savers should see the costs they pay drop while the quality of advice they receive improves.”
Rep. Richard E. Neal (D-Mass.), also on hand at the Democratic meeting with reporters, said the DOL addressed concerns he had with the rule, such as allowing the sale of proprietary products, which would have been prohibited under the proposed rule.
Neal had been one of the DOL's more notable Democratic critics. In February, he introduced legislation along with Rep. Peter Roskam (R-Ill.) that would prevent the regulation from taking effect unless Congress approved it .
But Neal said that because the DOL responded to requests that Congress had made, “it's a bit of surprise when you accomplish the goals you set out to, why would we be undertaking this proposal today?”
Neal also said that he wouldn't vote in favor of H.R. 4294 if it came to the floor.
Republicans recognize the challenge ahead of them in trying to kill the fiduciary rule. Roe, at a meeting held on April 26 by the U.S. Chamber of Commerce on the rule, said that after the president vetoes the resolution, it will then go back to the Senate, “and they will try override it, which they cannot,” adding that the financial industry will “be stuck” with the rule.
Roe, chairman of the House Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions, sponsored a bill that, paired with H.R. 4294, also would kill the rule if Congress didn't approve it.
Roe also promised to keep up the pressure on the DOL. He said that if he is re-elected to Congress, he would still be on the pensions subcommittee, where he will continue to focus on the rule “like a laser beam.”
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