Officials representing the National Association for Fixed Annuities (NAFA) said on Thursday that any measure by Congress to defund the U.S. Department of Labor’s fiduciary rule proposal would be temporary, even if choking off funds has a chance of passage.
Many people in Washington believe the defunding effort has “a pretty sold chance of passage,” but isn’t likely to be enough, according to Cliff Andrews, principal with CapCity Advocates, the lobbying organization that represents NAFA.
“That’s a stopgap measure, it’s temporary,” Andrews said during a webinar sponsored by NAFA on Thursday.
House Appropriations Committee lawmakers earlier in the week drafted defunding language and were ready to pass it on to the full House. Meanwhile, a Senate subcommittee was working on similar language for a vote by the full Senate.
But if lawmakers in the GOP-controlled Congress pass defunding language without amendments, it’s not clear whether the defunding language would appear as separate legislation or as part of a “mega-omnibus” spending bill, Andrews said.
Congressional lawmakers are in the midst of negotiations over the Obama administration’s spending plan for the 2015-2016 fiscal year which begins Oct. 1.
Insurance and financial advisors have opposed the DOL’s new rules since they were first proposed. Heavy lobbying from organizations such as NAFA and the National Association of Insurance and Financial Advisors succeeded in swaying lawmakers. Even the DOL is extending the comment period by several weeks.
In April, the DOL proposed new fiduciary standards governing the advice provided to qualified retirement plans employer plans and individual retirement accounts (IRAs). But financial industry groups came out and said the rules were “unworkable.”
Under the DOL proposal, so much as handing out a pamphlet about annuities or insurance products in qualified and nonqualified plans would raise questions about whether advisors have entered in a fiduciary discussion, NAFA officials said.
“You can see how confusing this would get,” Andrew said.
DOL proposed the rule as a way to impose a fiduciary standard on advisors to prevent what it called conflicts of interest and ensure that consumers get the best advice possible.
Consumer advocates, watchdog groups and lawmakers such as Sen. Elizabeth Warren, D-Mass., are in favor of the proposal.
Labor Secretary Thomas E. Perez recently rejected industry arguments that the proposed rule would restrict access to investment advice to middle-class investors while advisors focus on wealthier clients as the costs of doing business go up.
Andrews also said that while the DOL’s proposed rule represents “a radical sea change” in the way many insurance advisors would be compensated, “I don’t believe they (DOL) are solely targeting insurance agents.”
He said other financial services intermediaries might fall under the rule if it’s allowed to stand as proposed, and that the DOL was seeking to have a final rule in place by early 2016, before the next general election.
Andrews also said that NAFA was coalescing behind a ”best interest standard” in the proposed rule.
Chip Anderson, NAFA executive director, urged members to get involved in understanding the DOL proposal’s key points.
Insurance agents who’ve flooded Washington over the past several weeks have had hours of discussions with lawmakers about the rule, but there are still many agents who are not knowledgeable about the details of the proposal and how it affects them.
“Get everybody else involved and discuss this issue so that we can get the word out,” Anderson said.
Andrews said NAFA was finishing its official response to the rule before filing it with the DOL “within the next two weeks.”
The public comment period ends July 21, after which the DOL will hold a public hearing Aug. 10 on the proposed rule. The August hearing will be followed by another comment period.
“Depending on what happens at the August hearings, we might file a second set of comments,” Andrews also said.
Despite the expected flood of opposition to the proposed rule this summer, the DOL appears set on having advisors meet a fiduciary standard of advice, and NAFA officials acknowledged as much on Thursday.
In a separate webinar held earlier this year, Stephen P. Wilkes of the Wagner Law firm, quoted in a recent article published on InsurnaceNewsNet.com, said, “I think it will be just a question of when, and how much change and tailoring will occur to it before it gets final.”
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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