DOL: Don’t Call it a Fiduciary Rule

As reported last month by The DI Wire, the Department of Labor submitted a proposal to the Office of Management and Budget that “would amend the regulatory definition of the term fiduciary… [to] more appropriately define when persons who render investment advice for a fee to employee benefit plans and [individual retirement accounts] are fiduciaries.”

The DOL has been pursuing the higher advice standard since the Obama administration in 2016, when a fiduciary rule that broadened the definition of a person or entity taking on fiduciary responsibilities and replaced a five-part test used to decide who was fit to serve as a fiduciary was proposed but later struck down in 2018 by a federal appeals court.

But don’t call the new proposal a fiduciary rule.

“We’re intentionally referring to it as the ‘retirement security rule’ rather than the ‘fiduciary rule,'” assistant secretary of labor Lisa Gomez told reporters after speaking at an Oct. 16 TIAA event on retirement security in Washington. “The reason is because we want to really signal, and I think when folks read the rule, they will know by more than just the title, that this is not just a regurgitation of the old rule.”

Until released by the OMB (which can typically take about 90 days to review new rule proposals) and published, the public won’t know exactly what the DOL rule says. However, in the DOL’s abstract provided in its regulatory agenda, the department revealed that the rulemaking would amend the regulatory definition of the term fiduciary set forth to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of ERISA and the Internal Revenue Code.

“I think there’s been a lot of talk before the rule has even come out, there’s a lot of people that are publicly saying they hate the rule,” Gomez said. “I promise you that no one outside of the government has seen this rule.”

Opposition to the new rule is already fierce. In September, prior to the submission of the new proposal to the OMB, several members of Congress sent a letter to Acting Labor Secretary Julie Su in which they urged the agency to cease any further action to amend the definition of investment advice fiduciary.

Wayne Chopus, president and chief executive officer of the Insured Retirement Institute released a statement following the DOL’s submission of the proposal proclaiming that the new fiduciary rule will “hurt working families’ ability to save for retirement.”

In connection with the new rule, the DOL is also expected to review available prohibited transaction class exemptions and propose amendments or new exemptions with the intention to ensure consistent protection of employee benefit plan and IRA investors.

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