The House Committee on Education and the Workforce voted 23-18 to advance a resolution to overturn a Department of Labor (DOL) final rule to extend fiduciary status to nearly all financial professionals. Individuals designated as investment advice fiduciaries are required to always act in their clients’ best interests when managing their money.
In April, the DOL finalized the Retirement Security Rule to broaden the definition of an investment advice fiduciary under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. The updated definition, set to take effect on Sept. 23, will apply any time a trusted financial services provider gives compensated investment advice to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets.
“America’s workers and their families rely on investment professionals for guidance as they save for retirement,” DOL Acting Secretary Julie Su said in April. “This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest. Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions.”
The American Bankers Association and 12 other organizations representing financial services and investment firms wrote a joint letter in May urging lawmakers to overturn the DOL rule. The trade organizations contended the rule would harm lower- to middle-income workers, is unnecessary in light of existing state and federal laws, and was rushed without adequate public input.
“The federal courts have repeatedly rejected the DOL’s efforts to expand the universe of financial professionals subject to an ERISA fiduciary only standard,” the trades wrote. “A substantially similar rule was adopted by the DOL in 2016, and during the time it was in effect before being vacated by a federal Circuit Court of Appeals, this rule caused significant harm by severely limiting access to affordable financial professional help, a crucial resource for preparing for a secure and dignified retirement. More recently, the U.S. District Court in Florida struck down part of DOL’s 2020 ‘interpretation’ of investment advice fiduciary. To protect American workers and retirees against this foreseeable and unnecessary harm, we express our support for and ask that Congress act expeditiously to pass a CRA resolution to halt the implementation and enforcement of these rules.”
The further claimed the DOL acted with “blatant disregard for the limitations on its authority as established by Congress and the federal courts,” and Congress would be justified in disapproving the final rule via the Congressional Review Act.