Bipartisan Representatives Criticize DOL Fiduciary Rule Proposal

U.S. Representatives French Hill (R-AR), David Scott (D-GA), and Ann Wagner (R-MO) urged the DOL to "cease its efforts" to adopt the "Retirement Security Rule" proposal "to prevent needlessly inflicting harm on millions of retirement savers across the country."

The Representatives asserted that the DOL's fiduciary rule proposal would (i) cause harm to lower- and middle-income workers, (ii) disregard federal court rulings and (iii) increase expenses for retirement savings. (See also previous coverage, on comments by SIFMA and SIFMA AMG.) The legislators argued that the rule proposal includes "significant, unnecessary, and counterproductive changes to the existing regulatory framework governing the conduct of financial professionals who provide personalized investment advice to retirement savers under [ERISA] and the Internal Revenue Code of 1986 (the Tax Code)." The Representatives also stated that federal courts have repeatedly rejected previous efforts by the DOL to expand the definition of "fiduciary" which would limit investors access to professionals unwilling to be designated as "fiduciaries."

The representatives argue that the proposal ignores research and real-world experience that demonstrated that the previous 2016 fiduciary rule "significantly harmed" lower- and middle-income workers. They said that replacing the ERISA five-part test used to determine fiduciary status with a three-part test, "one prong of which would impose fiduciary status on any financial professional who recommends financial products" would cause many investment professionals to cease offering advice to workers without significant assets. After the 2016 rule, the Representatives noted that, more than 10 million smaller account owners no longer received advice from financial professionals.

Further, the Representatives argued that neither the DOL nor any other regulator has shown a need for the new proposal to redefine the term "fiduciary" in order to address conflicts of interest. The Representatives urged the DOL to recognize that regarding ERISA, there is "a fundamental difference in obligations between (i) investment advisers who are paid fees for advice, and who have long been considered fiduciaries, and (ii) stockbrokers and insurance agents, who generally assumed no such status in selling products to their clients."

The Representatives asked the DOL to withdraw the proposal and focus instead on "implementing the critically important retirement security provisions enacted by Congress in recent years through the SECURE Act and SECURE 2.0 Act" which they say provide "clear and appropriate opportunities" to help American workers save for a financially secure retirement.