Federal Roundup: DOL Final Fiduciary Rule Sent to the OMB, House Committees Pass Fiduciary Bills and Senate Introduces Companion Measures
Tension is rising among the financial services community as it braces for the release of the final fiduciary rule from the Department of Labor. On January 28, 2016, the DOL sent the final rule to the Office of Management and Budget (OMB) for regulatory review, which is standard practice for agency rulemakings in Washington, D.C. The OMB has up to 90 days to review the rule to make sure it follows certain principles outlined by executive orders that, among other requirements, direct the OMB to consider alternatives to a rulemaking. They also conduct an economic analysis of the rule’s costs and benefits to society. Most stakeholders believe the OMB will rubber stamp the DOL rule after a 45- to 60-day review period, which paves a path for a final rule to be published by the end of March. While the public is not allowed to see the details of the rule at OMB, sources indicate that the final rule will still contain many onerous and unworkable provisions.
In an effort to derail the rule, at the end of the first session of Congress last December, the Republicans produced a frenzy of activity as they attempted to add language to the omnibus spending package that would have defunded implementation of the rule. However, the President and senior Democrats led a strong fight against this effort, and ultimately the votes were not there to support this language.
At this point, the debate has shifted to a focus on bipartisan legislation that was introduced in the House at the end of December that would provide new fiduciary standards for the industry. Recently, the House Education and Workforce and Ways & Means Committees marked-up the legislation introduced by Reps. Roe (R-TN), Roskam (R-IL), Neal (D-MA) and Larson (D-CT), H.R. 4293 and H.R. 4294, which then passed out of the committees largely along party line votes. Most Democrats opposed the bills, contending they should only be considered after a final rule is published. Additionally, some members stated the bills are designed to undercut the DOL and will not protect consumers. If signed into law, the legislation would supersede the final DOL fiduciary rule unless Congress votes to approve the DOL rule. These bills are a joint package of legislation that would create a new best interest standard for advisors, provide for a seller’s exception and require concise new disclosures among other provisions. Shortly after the House Committees acted, companion legislation, S. 2502 and S. 2505, was introduced by Senators Isakson (R-GA) and Kirk (R-IL). Presumably, the Senate Finance Committee will consider these bills in the near future. Already, there has been strong opposition from consumer groups and the Administration.
Many industry observers believe these bills provide a workable alternative to the DOL’s final rule and NAFA has joined other insurance trade groups in the Secure Family Coalition to endorse them. While we hope legislation is not necessary and that the DOL will address changes suggested in NAFA’s comment letters, we must consider all options to protect an essential class of lifetime income products for Americans.