Murray, Senate Democrats Urge Department of Labor Not to Delay Vital Protections for Workers, Retirees
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"We are concerned that the approach of this Administration appears thus far to take into account only the concerns of industry and not of consumers. Before abruptly intervening to delay the...Final Rule,
The conflict of interest rule went into effect in June of last year to help workers and families get unbiased information when it comes to their retirement investments. It is estimated that conflicts of interest in retirement advice cost families
Senators joining the letter to the DOL include:
Full letter below and PDF can be found HERE https://www.help.senate.gov/imo/media/doc/031717%20Final%20Senate%20COI%20Comments.pdf:
Room N-5655
Re: Fiduciary Rule Examination (RIN 1210-AB79)
Dear Acting Secretary Hugler:
We write regarding the regulation proposed by the
Further, the study that is called for in the Presidential Memorandum, issued by the Administration on
Rulemaking Process
After more than six years of studying the industry and international trends, and engaging extensively with all stakeholders, the Department issued a Final Rule updating the definition of "fiduciary" in
We are concerned that the approach of this Administration appears thus far to take into account only the concerns of industry and not of consumers. Before abruptly intervening to delay the applicability date of the Final Rule,
Additionally, it appears
Harm to Consumers and Industry
Prior to issuing the Final Rule, the
Further, the market appears to be adjusting in a manner that is beneficial to consumers. Companies have launched campaigns advertising they are already operating under a best interest standard.[6] And quite significantly, companies have started lowering fees[7] and standardizing commissions, in addition to implementing other consumer-friendly innovations.[8]
In addition to harming consumers, we believe the Proposed Regulation will inject uncertainty into the market, which was a primary complaint voiced by industry during the prior rulemaking process. The financial industry has spent a considerable amount of time and money and made significant changes to business practices to comply with the rule; accordingly, inserting the possibility of a new rule would unnecessarily disrupt the marketplace without any benefits to consumers.
Insufficient Regulatory Impact Analysis for Proposed Regulation
We have a number of comments related to the Regulatory Impact Analysis accompanying the Department's Proposed Regulation (henceforth "2017 RIA"). As an initial matter, the 2017 RIA is severely lacking in its analysis and does not come close to justifying the delay's harm to retirement savers. The 2017 RIA is insufficient for a regulatory action deemed economically significant by the
Second, the 2017 RIA presents no new data or empirical analysis that was not provided in the 2016 RIA, which found that the costs of rule implementation on
Third, the 2017 RIA fails to establish that the benefits of the proposed delay would outweigh the costs of such a delay. The 2017 RIA acknowledges that quantified losses to retirement savers from the delay could be expected to total approximately
Fourth, there are too many acknowledged uncertainties, and the 2017 RIA is simply insufficient for the Department to move forward with a new final rule that would delay the applicability date of the conflict of interest rule. The Department could have issued a Request for Information before proposing to delay the Final Rule with zero economic justification.
Concluding that the Proposed Rule's benefits justify its costs using only the information currently available in the 2017 RIA would be arbitrary and would provide no factual justification for the harm the Department acknowledges a delay in the Final Rule would inflict on millions of retirement savers. Incorporating an enormous amount of new information gained from new comments and reaching a new conclusion about whether the delay's benefits justify its costs in a new RIA accompanying the issuance of a final rule would also be unacceptable, as it would not offer the public any opportunity to comment on the Department's reasoning given that no such arguments or conclusions are presented in the current 2017 RIA. If the Department wishes to go forward with a delay, it must re-propose this economically significant rule with a fully-formed regulatory impact analysis that the public can provide informed comment on.
Protecting Retirement Savers and Modernizing Rule is well within the Department's Authority
The day
In three separate court cases, the Department has been found to have acted within its authority to promulgate this regulation and within its exemptive authority to adopt the prohibited transaction exemptions.[10] In addition to holding that the Department properly exercised its authority, the judge in the case heard in the
In addition, in the
Presidential Memorandum Calls for Redundant and Wasteful Study
The reevaluation of the Final Rule that the delay is meant to facilitate is unnecessary, redundant, and a waste of taxpayer dollars. In the Presidential Memorandum, the Department was directed to:
"[P]repare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following:
(i) Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans' access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
(ii) Whether the anticipated applicability of the Fiduciary Duty Rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and
(iii) Whether the Fiduciary Duty Rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services."
As part of the rulemaking process the Department undertook in completing the Final Rule, the Department prepared a 382-page regulatory impact analysis (the "2016 RIA") examining in great detail the expected economic impacts of the rule. As noted above, this was the culmination of a roughly six-year process that incorporated the feedback of thousands of public comments submitted to the Department in multiple comment periods. Included in that analysis were discussion of the exact issues the Administration seeks to study according to the new Presidential Memorandum. Below is where the Final Rule's 2016 RIA addressed each of these questions.
Harm or Likely Harm to Investors Due to a Reduction of Access to Retirement Advice, Etc.
Multiple portions of the 2016 RIA deal explicitly with these questions. For example, Section 2.10 looks extensively at the experiences of other nations in implementing similar standards, including the experience of the
Dislocations or Disruptions within the Retirement Services Industry that
The 2016 RIA has also already dealt explicitly with this question, most clearly in Section 8.4. Section 8.4.1, for example, states that "Advisory firms' responses to the Final Rule and exemptions (and to related changes in consumer demand and competition) will impact the labor market for advisers. These dynamics may involve frictional costs and have distributional effects. For example, advisers may migrate from advisory firms where conflicts had been most deeply embedded to firms that are well situated to efficiently provide impartial advice compliant with the Final Rule and exemptions. The overall movement is likely to be toward greater long-term efficiency, with a more efficient allocation of labor and other resources to investment advice and other productive enterprises."
Increase in Litigation or Increase in Prices that Investors and Retirees Must Pay for Retirement Services
Again, the 2016 RIA has already addressed this question. Section 5.4.1 in the analysis of the costs of the rule explicitly addresses the issue of litigation and states that "The Department understands that (1) premiums for these affected advisers could be expected to increase by approximately 10 percent due to their new fiduciary status, (2) insurance is priced on a per-representative basis; and (3) the average insurance premium is approximately
Conclusion
Delaying the conflict of interest rule to revisit questions that were already addressed in detail in the thorough economic analysis accompanying the Final Rule is irresponsible and harmful to retirement savers. The Administration should look to the Final Rule's 2016 RIA to address the questions to which it seeks answers and not punish Americans struggling to save for retirement by postponing a necessary consumer protection for the purposes of producing a redundant unnecessary analysis.
For the reasons outlined above, we strongly urge the Department not to conduct the wasteful and redundant study called for in the Presidential Memorandum as a means to justify changing the Final Rule and weakening protections for retirement savers. We call on the Department and the President to demonstrate their commitment to America's retirement savers and proceed with the Final Rule's applicability date of
[1] Definition of the Term "Fiduciary;" Conflict of Interest Rule- Retirement Investment Advice, 81 Fed. Reg. 20,946 (
[2]
[3] Exec. Order No. 13,770, 82 Fed. Reg. 9,333 (2017), https://www.gpo.gov/fdsys/pkg/FR-2017-02-03/pdf/2017-02450.pdf.
[4]
[5] Executive Office of the President,
[6] "Merrill Lynch Showcases DOL Stance in New Ads," WealthManagement.com (
[7] "DOL fiduciary rule may finally spark lower fund fees for mutual funds," InvestmentNews (
[8]
[9] Transcript of Press Briefing by Press Secretary
[10]
[11]
[12] Mkt.
Read this original document at: https://www.help.senate.gov/ranking/newsroom/press/murray-senate-democrats-urge-department-of-labor-not-to-delay-vital-protections-for-workers-retirees
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