Bipartisan legislation offering an alternative to the Department of Labor’s fiduciary rule passed out of the Ways and Means Committee’s first mark up of the year Wednesday in a 26-12 vote – but not without pushback from some Democrats.
Critics of the proposed regulation, which aimed at protecting investors from conflicts of interest, say it will limit access to retirement advice for low- and middle-income Americans.
Illinois Republican Rep. Peter Roskam and Massachusetts Democrat Rep. Richard Neal introduced the SAVERs Act as an alternative to the proposed rule in an attempt raise standards on advisers to root out bad actors like Bernie Madolff, without implimenting unreasonable regulations that would put financial planners at risk for an increase in lawsuits. Some members of the committee say the agency’s regulation is necessary and feel it is too soon to act since the final rule – which was sent to the White House Office of Management and Budget for approval last week – has not been rolled out.
“We should not be holding this markup today. It is essentially an attempted end-run around the rule-making process,” Ranking Member Sander Levin said in his opening statement. “This bill sets a harmful precedent, and I emphasize that.”
Chairman Kevin Brady said the committee is “operating on an accelerated timeline” to prevent the highly controversial rule from being implemented.
The initial DOL proposal calls for investors to either use a robo-adviser – the option favored by the Obama administration –or a fee based financial planner for their retirement planning needs.
“They wouldn’t be able to have that advice. What does DOL say? Go to a website. Go to a website to get your advice,” Roskam said. “None of us [are] in favor of that.”
By changing the was advisers are compensated, many members of Congress expressed concern it would alienate a large number of Americans who can’t afford high fees while shopping around for the investment plan that best fits their personal needs.
“What frustrates me is that it hurts the very people who need this advice the most – the unsophisticated investor,” Pennsylvania Republican Rep. Patrick Meehan said. “We are denying to so many people out there the opportunity to have this kind of advice. Which the rich get.”
Rep. Earl Blumenauer said he thinks “retirement security is a pending crisis,” but doesn’t believe the SAVERs Act is premature.
“Maybe there is somebody on this committee who has a Wikileaks source and has read the rule,” the Oregon Democrat said. “Is there somebody on the committee who knows definitely what is in the rule that has yet to be released? So we are having people making these bold assurances about how we have to rush forward and undercut the rule making process.”
“We are not talking about a proposed rule, we are talking about a final rule. The Department of Labor Could disclose the rule at any time, there has been no disclosure,” said in response, adding not having seen the rule is part of the problem.
While 12 Democrats on the committee voted against the measure, 96 members of the party in the House signed a letter in 2015 pushing back against the proposed rule due to its potentially harmful effects.
GOP lawmakers said they feel the rule is an overreach by the administration into people’s finances.
“It is as if the Administration intends for the rule to force Americans out of 401(k)s and IRAs and into the government plans for private sector workers promoted by the other administration initiatives,” Brady said at the close of the markup.
The final DOL rule is expected to be rolled out in the spring.
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