Could DOL Rule Get Caught Up In ‘Regulation Day’ Madness?

The Department of Labor will issue its fiduciary rule sometime this spring, but there’s no guarantee it will be enacted as written.  Congress, the courts and a new president all have tools to repeal the regulation, although those tools are rarely used and the process for using them may be somewhat arduous.

The Obama administration is racing to issue as many regulations as possible by May 17 or “Regulation Day.”  The May 17 date is significant because a number of factors make it less likely that Congress or a new president would repeal any rules issued around this date. Here is a rundown of what could happen in the weeks and months after the DOL rule is issued.

Options for Congress

Typically, final regulations go into effect 60 calendar days after publication in the Federal Register.  Congress and the General Accounting Office (GAO) can review the final rule during this 60-day period.

Congress has two options if it wants to repeal the regulation. First, it could pass legislation that creates a more explicit statutory mandate.  This would effectively set aside the regulation.

Congress can pass the bill only if it has at least 60 votes to force a full vote in the Senate.  However, the body’s current partisan composition doesn’t lend itself to this 60-vote, filibuster-proof majority.

Alternatively, Congress could deploy a little-used procedure created by a part of the Contract with America.  The Congressional Review Act of 1996 granted Congress the authority to deploy an expedited procedure -- a Resolution of Disapproval -- which sidesteps the 60-vote hurdle.

But the sitting president must sign the resolution for it to be enacted, unless Congress has a two-thirds majority to override the veto.  Notably, this authority must be used within 60 session days of Congress, which is a different accounting than the 60 calendar days for a final rule to take effect.

Although Congress has attempted a Resolution of Disapproval a few times in the past 20 years, it has been successful only once.  Congress overturned a controversial Occupational Safety and Health Administration ergonomic standards regulation that President Bill Clinton issued in late 2000.

In early 2001, President George W. Bush signed the Resolution of Disapproval because the 60-day session clock was equivalent to about four calendar months.  OSHA, which is part of the DOL, hasn’t issued a new rule related to ergonomic standards in the past 15 years because the Congressional Review Act prohibits it from issuing a similar regulation.

And yet, perhaps these procedures are only theoretical in the current political climate.  Congress doesn’t act on much unless it is facing a crisis.  The insurance industry hasn’t yet felt the pain of the new fiduciary rule.  Therefore, Congress is unlikely to act until the industry actually experiences the headache of the new regulation.

Options in the Courts

The DOL rule also could end up in the courts.  A U.S. District Court could find the rule unconstitutional, arbitrary and capricious, or exceeding DOL’s legal authority.  If the reviewing court decides to vacate the rule, it is sent back to DOL to remedy the deficiencies. If that happens, the agency may have to restart the rule-making process from the beginning.

Options for the New President in 2017

The new president who will take office in January 2017 also will have multiple options to repeal the regulation.  However, most of these mechanisms are laborious.

The president’s easiest route will be to suspend the effective dates of “midnight regulations.” Like every administration in the past 30 years has done, the Obama administration will issue rules in its final months with effective dates that run into 2017.

A new president also can direct agencies to reverse rules that take effect before the new term begins.  But this process is not for the faint-of-heart:  it requires completing a full rulemaking procedure to repeal the regulation.

Finally, a new president can ask Congress to pass a law overturning the regulations he or she objects to.  This law requires a filibuster-proof majority in the Senate – a high bar to cross.

In the meantime, although the final fiduciary rule may go into effect at the 60-day mark, it is unlikely changes will be implemented that quickly.  Within the final regulation, DOL could elect to delay enforcement for a certain number of months to allow the industry adequate time to adjust to the new requirements.  This delay would reduce the political risk of Congress overturning the regulation.  The agency also could phase-in rule provisions over a longer period of time to help address similar concerns.

Julie M. Anderson served as an executive in the Obama Administration and at IBM.  She now leads AG Strategy Group, which provides strategy consulting and management training services to government agencies and federal contracting companies. Julie may be contacted at [email protected].

© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Julie M. Anderson served as an executive in the Obama Administration and at IBM. She now leads AG Strategy Group, which provides strategy consulting and management training services to government agencies and federal contracting companies. Julie may be contacted at [email protected].