More drama occurred Monday in Nashville in what was already a dramatic 401(k) Summit consumed with the fallout from the recent release of the DOL’s fiduciary rule.
News came that U.S. Senators Johnny Isakson, R-Ga., Lamar Alexander, R-Tenn., and Mike Enzi, R-Wyo. introduced a resolution to stop the rule, calling it “harmful new regulation that will have devastating effects on retirement planning by hardworking families and small businesses.”
On April 6, 2016, the U.S. Department of Labor finalized a rewrite of its definition of a fiduciary, allegedly to protect individuals from misleading investment advice, but, in practice, “the new rule will make retirement planning unaffordable for low- to middle-income Americans whose accounts are not valuable enough for advisors to take on the new legal liability created by the rule,” the senators claim.
Isakson, Alexander and Enzi today filed a resolution of disapproval under the Congressional Review Act to reject the administration’s new so-called “Retirement Advice Gag Rule.”
“I have worked to fight the implementation of this harmful rule since it was first proposed and promised to do all I could to overturn it before it can harm Georgia families. The introduction of this resolution is the next step in the battle,” Isakson, who is chairman of the Senate Health, Education, Labor and Pensions Subcommittee on Employment and Workplace Safety, said in a statement. “Like so many of this administration’s decisions, their new fiduciary rule harms the very individuals it seeks to protect and prevents those hardworking Americans who are trying to plan for retirement from having the opportunity to access retirement advice.”
“Retirement planning is going to be available only to the rich under the Labor Department’s so-called ‘fiduciary’ rule, because many financial advisors won’t risk the new legal liability except for clients with big accounts,” Senate labor committee Chairman Lamar Alexander added. “Congress needs to overturn this rule before it cripples low- and middle-income Tennesseans’ access to affordable retirement advice—and forces them to work longer and retire with less.”
“This rule is a solution in search of a problem. Right now a kid with a paper route, a family with some savings, or a small business looking to help their employees can get retirement planning advice from an advisor without much hassle,” said Enzi, chairman of the Senate Budget Committee, chimed in. “I am concerned that this new rule will cut off access for that advice unless you have more money to pay for increased fees the rule will likely cause. We already have financial literacy problems and this rule could stifle access to the good information already available, hurting the exact people that the rule is supposedly designed to serve.”
If approved, the resolution of disapproval would allow Congress to stop the Department of Labor from implementing this harmful rule, which will deny retirement advice to low- and middle-income savers, which is what happened when a similar change was adopted in the United Kingdom.
Isakson has previously fought the fiduciary rule in the Senate by:
- Introducing the Affordable Retirement Advice Protection Act, which would require a vote by Congress before any final rule by the administration went into effect;
- Co-sponsoring the Retail Investor Protection Act, which would prohibit the Department of Labor from issuing its rule until the U.S. Securities and Exchange Commission has issued a final rule relating to standards of conduct for brokers and dealers and has satisfied additional reporting requirements; and
- Co-sponsoring the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act, which seeks to block the Department of Labor’s “harmful” fiduciary rule and provide a viable alternative that would.
In October 2010, the Department of Labor proposed rewriting its regulatory definition of a “fiduciary,” allegedly to protect individuals from misleading investment advice. However, the administration later withdrew its rule amid widespread, bipartisan criticism that the proposal would essentially prevent lower- and middle-income investors from gaining access to the advice market and would likely result in confusion and ultimately discourage savings participation.
Despite these concerns, the Department of Labor finalized its fiduciary rule in April 2016 that fails to address many of the concerns raised over the previous rule.
The rule was made final on April 6, 2016.