skip to navigation

Education & Labor Committee Republicans

Contact: Press Office (202) 226-9440
Roe Statement: Hearing on "Redefining 'Fiduciary': Assessing the Impact of the Labor Department's Proposal on Workers and Retirees"
As prepared for delivery.

Recently, we learned about the challenges confronting the retirement security of workers and retirees. The lingering effects of the recession and an uncertain regulatory environment reaffirm the need for policymakers to tread carefully as they consider changes to the rules that govern retirement investment. Policies in this area should provide clear guidelines that protect workers, but also be flexible enough to permit a wide range of investment opportunities. Striking the right balance between these two competing demands remains a constant policy goal. 

We are here this morning to discuss the Labor Department’s proposal to redefine the term “fiduciary.” The Employee Retirement Income Security Act charges fiduciaries with the highest level of care to individuals participating in a retirement plan. Anyone who provides investment advice should be well trained, committed to high ethical and professional standards, and devoted to the best interests of those whose financial resources are entrusted to their care. However, the dramatic shift proposed by the department may well disrupt stable, effective relationships between retirement savers and service-providers. 

For more than 35 years, regulations surrounding fiduciary responsibility have provided certainty to employers and other retirement plan sponsors. Currently, an investment adviser is considered a fiduciary under the law if they offer individualized advice on a regular basis for a fee. The fiduciary’s advice must be provided pursuant to a mutual agreement and be the primary basis for a resulting investment decision. 

However, the Labor Department has now decided to rewrite the rules of the road. Among other changes proposed by the department, fiduciary status would no longer hinge on whether advice was provided regularly or served as the primary reason for an investment decision. While we support looking at ways to enhance this important definition, the current proposal is an ill-conceived expansion of the fiduciary standard. It will undermine efforts by employers and service providers to educate workers on the importance of responsible retirement planning. Regrettably, the proposal may deny investment opportunities and drive up costs for the individuals it is intended to protect. 

Remarkably, the department failed to examine all of the potential costs of its proposal. For example, despite clear indications this proposal may force small business plan sponsors to face higher fees and receive fewer services, the department neglected to conduct any analysis of the potential ramifications. Similarly, the department failed to explore how its proposal could affect the IRA market. One study suggests that some IRA-related fees may increase as much as 195 percent – that’s an unacceptable amount of money that will never make it into a retirement account.  

This is a difficult issue, and we should never lose sight of the real world impact these changes may have on the investments and long-term retirement security of workers and retirees. We need to challenge any proposal that could curb investment opportunities, raise the costs of investing, and reduce the return on those investments for individuals saving for retirement. 

I’d like to note that leaders on both sides of the aisle have expressed worry about the department’s proposal. In April, Chairman Kline and other Republican committee leaders across the Capitol expressed their concerns and urged the department to re-propose the rule. On May 10, members of the Democrats’ Blue Dog coalition described a number of uncertainties raised by the proposal and the rushed regulatory process. And finally, members of the New Democrat Coalition asked the administration to heed public concern and begin anew. It’s not every day such a diverse group of lawmakers find common ground on an issue. 

Conceding the challenges that plague this proposal, the department has promised to address concerns through either targeted exemptions or future rulemaking. I am afraid this will only exacerbate the uncertainty facing investment professionals and increase risk for workers and retirees. With all due respect, Assistant Secretary, if this proposal is so disruptive to our system of retirement saving, then the department needs to take a step back and start over. I would like to join my Republican and Democrat colleagues in urging the administration to do just that. Once this proposal has been set aside, I believe we can work together on policies that will strengthen the retirement security of millions of Americans.

# # #

  • starE-NEWS SIGN-UP

Sign up to receive the committee’s
e-newsletter, the Weekly Wrap-Up.

back on top