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Any Congressional Action on Proposed DOL Fiduciary Rule Postponed to 2016
Wednesday, December 23, 2015

As the Department of Labor (the DOL) considers comments on its proposed changes to the definition of an “investment advice” fiduciary under ERISA, an open question has been whether Congress would take action to delay or block the rule. Although several possible approaches were actively discussed, Congress ultimately did not pass any legislation in 2015. But these approaches remain open for 2016.

Although the criticism of the DOL proposal has come largely from Republicans, many Democrats have also expressed concerns. For example, in September, 96 House Democrats joined in a letter outlining recommended changes to the rule, and in October, 47 House Democrats urged the DOL to reopen the comment period before issuing a final rule. For this reason, it was thought that there might be sufficient support to pass a bill that would at least delay the DOL’s ability to issue a final rule.

More recently, the discussion focused on adding a rider dealing with the fiduciary rule to “must-pass” legislation—namely, last week’s federal government omnibus appropriations bill. One possibility was a rider that would prohibit the government from spending any money to work on the proposal, but this faced a veto threat and little (if any) Democratic support. Another seemingly more promising approach was a rider that would require the DOL to publicly respond to the comments that it had received and to hold another 30-day comment period before finalizing the rule. However, that also was not included.

A third possibility was legislation that would preempt DOL action on changing the “investment advice” fiduciary definition through a statutory change. A bipartisan proposal described in November by Representatives Peter Roskam (R-IL) and Richard Neal (D-MA) had listed a series of “best interest” principles that they said would be used as a basis for drafting such legislation. Their proposal would possibly be added to the omnibus appropriations bill, but that did not occur.

Instead, the Roskam-Neal proposal was introduced as a standalone bill on December 18 along with a separate bill sponsored primarily by Reps. Phil Roe (R-TN) and John Larson (D-CT). The Roskam-Neal bill, formally called the Strengthening Access to Valuable Education and Retirement Support Act of 2015 (H.R. 4294), would establish a “best interest” standard for investment advice rendered to qualified retirement plans and IRAs under the Internal Revenue Code and would adopt several elements of the DOL proposal but with a number of modifications. The Roe-Larson bill, or the Affordable Retirement Advice Protection Act (H.R. 4293), would make largely parallel changes to ERISA. Both bills would prohibit the DOL from amending the current fiduciary investment advice definition unless Congress specifically approves such a DOL rule within a specified time period.

Another proposal that has been discussed is to prevent the DOL from finalizing its proposed changes to the fiduciary investment advice definition until the Securities and Exchange Commission (SEC) completes work on a unified fiduciary standard for investment advisers and broker-dealers. Such a bill was introduced in October by Rep. Ann Wagner (R-MO), but has been opposed by many Democrats on the basis that the SEC has not to date indicated a clear timetable for moving forward with a unified fiduciary standard.

The DOL is expected to continue working on a final rule, which is anticipated to appear in the Federal Register by mid-2016. The final rule is expected to take effect, possibly subject to transition relief, by the end of the Obama administration, absent action by Congress or possibly a litigation challenge.

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