E&W Blog

In proposing the so-called “Retirement Security Rule,” the administration is out way over its skis. DOL has jurisdiction over employer-managed retirement accounts, or 401(k)s, but not the entire retirement investment industry that would be swept up in the new proposed rule that redefines fiduciary status.

Chairman Bob Good (R-VA) chided DOL’s lack of expertise and burdensome overregulation in his opening statement. “DOL’s expansive rule is a blatant power grab, seeking to force more types of financial professionals under its control,” said Chairman Good.

Doug Ommen, the Insurance Commissioner of the Iowa Insurance Division, testified to the potential retirement products that could be limited under the onerous proposed rule. “Given the retirement savings gap, the Department of Labor should be encouraging—not limiting—access to well-regulated retirement guidance and products, such as annuities,” said Mr. Ommen in his opening statement.

If DOL goes ahead and accidentally—or perhaps intentionally—confers fiduciary status on all financial services professionals, the entire retirement investment community will be at risk. “The effect of those added burdens would be to leave large segments of the retirement community either unserved altogether, or underserved,” warned Thomas Roberts, Principal at Groom Law Group, in his opening statement.

The expert witnesses concurred, fiduciary status under the Employee Retirement Income Security Act is not to be taken lightly.

Moving to questioning, Members expressed concern with DOL’s decision to run roughshod over other federal agencies, state governments, and even a federal circuit court of appeals with its new rule. Republicans rattled off yes or no questions in rapid fire.

“Did DOL work with the states to develop the proposed fiduciary rule?” asked Rep. Tim Walberg (R-MI).

“Nothing substantive was ever discussed,” replied Mr. Ommen.

“Do you believe the SEC’s regulation, ‘best interest,’ and the states’ rules are effectively protecting retirement investors?” questioned Chairman Good.

“I do,” replied Mr. Roberts.

“Does the fiduciary proposal comply with the 5th Circuit’s decision?” asked Rep. Rick Allen (R-GA), regarding a federal court ruling on a similar Obama-era regulation.

“How the Department of Labor’s current proposal could possibly be consistent with the 5th Circuit’s ruling on the prior proposal is a real head scratcher. I do not see it,” responded Mr. Roberts.

Unaccountable to the states. Unaccountable to the courts. Unaccountable to the rest of the government. Each is a tell-tale sign of a bureaucracy that has gotten too big and too powerful to manage.
 
And who gets harmed by an unwieldy bureaucracy? Working class Americans. Inevitably, the proposed rule would force brokerage firms to switch to a fiduciary model. Jason Berkowitz, Chief Legal and Regulatory Affairs Officer at the Insured Retirement Institute, explained exactly what that means.

“Less than 30 percent [of brokerage firms] have account minimums. If this rule goes into effect, that is going to go up to 70 percent. These are sizable account minimums, six-figure account minimums, that the average American simply can’t meet. So, people are going to lose access, and it’s those small balance savers that are going to be the most hard hit,” said Mr. Berkowitz.