So far, the Department of Labor’s push to create a uniform fiduciary standard for anyone giving retirement account advice has pitted Republicans against Democrats.
GOP members oppose the rule changes, while the Democrats stand with the White House in favor. However, cracks may be developing in that dynamic.
In a carefully crafted letter, nine House Democrats are asking the DOL for “improvements” to the rule. The letter questions the exemptions for compensation practices, investor education and the implementation plan.
“In order to have a successfully implemented rule, it is vital that the proposal doesn't limit consumer choice and access to advice, have a disproportionate impact on lower‐ or middle‐income communities, or raise the costs of saving for retirement,” the letter states.
It is signed by Reps. Gwen Moore, D-Wis., Tony Cardenas, D-Calif., Emanuel Cleaver, D-Mo., Ann McLane Kuster, D-N.H., John Larson, D-Conn., Grace Meng, D-N.Y., Richard Neal, D-Mass., Ron Kind, D-Wis., and Kyrsten Sinema, D-Ariz.
Juli McNeely, president of the National Association of Insurance and Financial Advisors, said the letter is more evidence of widespread opposition to the rule as it is written.
“The Democrats’ letter, along with previous letters and statements from Republicans and Democrats in Congress, show that there is bipartisan support in Congress for DOL to fix the proposed rule, which is unworkable as currently written,” she said in an email.
The DOL has maintained an aggressive timeline since introducing the rule in April. A four-day public hearing was held last month and more comments are being accepted until Thursday.
The rule proposes to adopt some of the most far-reaching changes to the way advisors handle retirement accounts in more than 40 years since the creation of the Employee Retirement Income Security Act of 1974.
Observers expect the DOL to issue a final rule by early next year.
In the letter, Democratic House members called for a more deliberate process that includes “convening a small working group of industry professionals and consumer advocates to aid with the finalization of the Rule as to further ease any final implementation issues.”
The letter also asked the DOL to allow a “good faith implementation.” That would allow those who work with retirement plans “to comply with the rule without the threat of lawsuits,” the letter reads.
The Democrats emphasized that they favor a fiduciary only rule – with the suggested changes.
For example, the letter called out the best interests contract (BIC) exemption, which would allow brokers to accept various forms of compensation as long as they agree in writing to act as fiduciaries for their clients.
“We believe the department could accomplish the goals of the BIC using a less prescriptive and more principle-based approach to implementation,” the letter states.
The lawmakers also said the rule should permit specific investment examples in investor-education materials, and should not restrict access to annuities.
The up‐front costs associated with setting up an annuity may be higher than other retirement options, such as a mutual fund, the Democrats noted. But the guarantee offered by the annuity is a value to consumers “not offered by other, lower cost options.”
When those costs are amortized over the life of the annuity, it may “bring the costs in line with options that initially appeared cheaper,” the letter reads. “The (DOL) should, therefore, take steps to clarify that the Rule does not disadvantage lifetime income options.”