Three dozen Republican senators have added their voices to the demands by Congress that the Department of Labor’s (DOL) extend the comment period on the proposed fiduciary standard another 45 days.
It comes as financial services trade associations opposed to changing the fiduciary standard step up the pressure by using their annual “fly-ins” to meet with members of Congress about their legislation priorities to focus on stopping the new standard.
On the other hand, Barbara N. Roper, director of investor protection, Consumer Federation of America, explained what is going on by saying that, “There’s absolutely no justification for delaying this process further. It is a transparent attempt to kill the rule by running out the clock.”
She explained that DOL has “provided a very generous 75-day comment period,” with the promise of a public hearing and an opportunity for further comment after that hearing.
Last week, 26 Democratic members of Congress, including eight members of the Senate, made a similar request.
And, Sen. Orrin Hatch, R-Utah, on Tuesday announced that he planned to introduce legislation that contains a provision that would reduce the DOL’s authority to regulate investments in retirement accounts. Hatch’s bill, if enacted, would likely derail the DOL proposal.
Its primary purpose would be to create a new public retirement plan for state and local government that would allow insurance companies to provide pension benefits through fixed annuity contracts.
However, Title III of the bill would return to Treasury Department jurisdiction over prohibited transaction exemptions for IRAs (noting that Treasury held the authority prior to an Executive Order in 1978).
It would also require the Treasury to consult with the SEC regarding the standard of care brokers owe to IRA investors. And it would return joint jurisdiction to the Treasury and DOL to issue regulations regarding all prohibited transaction rules for employer- sponsored retirement plans.
That would likely ensure that it would be impossible for the Obama administration to complete work on the rule before his term ends in January 2016.
Hatch originally introduced his bill, the Secure Annuities for Employee (SAFE) Retirement Act, in the last Congress.
Once it is introduced, it could be placed into any one of many pieces of legislation that Congress must act on this year, even if the provisions from Hatch’s bill included in them are not germane.
The letters from members of Congress followed a request several weeks ago by 16 trade associations representing financial services industry companies for a similar extension, which would increase the comment period to three months, or 120 work-days. Currently, the proposal has a 75-day comment period that ends July 6.
As to trade groups, the Financial Services Institute, which represents independent broker-dealers and financial advisers, has its members in town to meet with members of Congress. The FSI is amongst the groups supporting an extended comment period.
Moreover, two officials of the National Association of Insurance and Financial Advisers met last week with members of the White House staff to voice their concerns about the DOL proposal.
Also, NAIFA plans a “fly-in” on May 20, whereby 800 NAIFA members will talk to their congressmen about the issue, according to Sheila Owens, NAIFA vice president of communications.
The day before, they will be briefed on how to approach their representatives. The speaker will include Rep. Ann Wagner, R-Mo., a vocal opponent of the rule, and Dirk Kempthorne, president and CEO of the American Council of Life Insurers.
NAIFA concerns about the proposed rule include fears it limit advice regarding plan distributions (including IRA rollovers) to retirement savers as well as small plan sponsors. There are also concerns that it will limit the ability of issuers and advisers to educate plan beneficiaries about the value of insurance products.
Another concern is that it will restrict advisers affiliated with plan service providers (e.g., the insurance company) from selling variable annuities.
Moreover, NAIFA officials argue that it would “mandate impractical and costly burdens on advisors and financial institutions.”
The letter by the 36 Republican senators Tuesday argues that the present 75-day comment period “is not an appropriate amount of time.”
The letter said that when the DOL published an earlier proposal, it extended the comment period beyond the original 90-day comment period.
The DOL's current proposed rule and exemptions “implicate the same need for thorough consideration of all issues and interests to make sure working and middle-income Americans are not harmed.”
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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