Congressional Resolutions Target New DOL Fiduciary Rule
Congressional Review Act resolutions were introduced in the House and Senate to disapprove the final Department of Labor regulation, Retirement Security Rule: Definition of an Investment Advice Fiduciary, aka the fiduciary rule released April 23, 2024.
The long-debated, controversial rule updates the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code and is set to take effect Sept. 23, 2024.
Rep. Rick Allen (R-GA) is leading the four House CRA resolutions, also supported by Virginia Foxx (R-NC), chairwoman, House Committee on Education & the Workforce. The resolutions are H.J. Res. 140, H.J. Res 141, H.J. Res. 142, and H.J. Res. 143.
Sens. Ted Budd (R-NC); Bill Cassidy, M.D. (R-LA), ranking member of the Senate Committee on Health, Education, Labor & Pensions (HELP); Joe Manchin (D-WV); and Roger Marshall, M.D. (R-KS) introduced the Senate CRA measure – S.J. Res. 79 – to “overturn a flawed rule from the DOL that would endanger financial choice and access.”
The final rule and related amended prohibited transaction exemptions require investment advice providers to give “prudent, loyal, honest advice free from overcharges.” Fiduciaries must adhere to high standards when they recommend investments and avoid recommendations that favor the investment advice providers’ interests – financial or otherwise – at the retirement savers’ expense. Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines.
The updated definition of an investment advice fiduciary applies when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners, and plan officials responsible for administering plans and managing assets.
Those policymakers disputing the rule says it threatens to gut a wide range of financial tools that many of the largest financial planning and wealth management firms currently offer consumers, including basic financial education and investment planning courses, life insurance, annuity plans, and other financial instruments.
“This [DOL] rule is yet another example of dangerous federal overreach. While I understand the administration’s intent to protect Americans’ retirement savings, the truth of the matter is this does the exact opposite. If allowed to go into effect, the rule has the potential to cause many West Virginians to actually lose access to investment advice due to how broadly the rule defines fiduciary,” said Sen. Manchin.
“Hardworking West Virginians and Americans need protection, not uncertainty when it comes to their long-term financial security, and they certainly do not want or need the federal government further involved in their personal retirement decisions. I encourage my colleagues on both sides of the aisle to support our Congressional Review Act resolution of disapproval to overturn this reckless rule,” Manchin added.
Other Senate co-sponsors of the CRA include Sens. Kevin Cramer (R-ND), John Barrasso (R-WY), Chuck Grassley (R-IA), Steve Daines (R-MT), Joni Ernst (R-IA), Bill Hagerty (R-TN), Jim Risch (R-ID), Roger Wicker (R-MS), Mike Crapo (R-ID), James Lankford (R-OK), Marsha Blackburn (R-TN), and Mike Braun (R-IN).
This isn’t the first time we’ve heard concerns from Congress. Although the CRAs are being sponsored by mostly Republicans, a membership organization/coalition representing 18 financial service companies examined the content of and process leading to the final Retirement Security Rule and cited input from several Democrats.
The Insured Retirement Institute supports the resolutions.
“The final rule creates significant hardships for today’s workers and retirees, making it much more expensive and complicated – and for many consumers, impossible – to access reliable professional guidance,” said Wayne Chopus, president and chief executive officer of the advocacy group. “That is why IRI supports the passage of a CRA resolution. Congress must disapprove the final rule to prevent the deepening of the retirement savings gap and the establishment of unnecessary barriers for workers to overcome as they seek a secure and dignified retirement.”
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