Department of Labor rejects request to extend comment period on fiduciary rule, as House moves to block rule
It’s been a fast-moving few days for the Department of Labor’s (DOL) proposal to amend the definition of fiduciary investment advice, as the House GOP intensified its efforts to block the DOL from implementing its proposal, while the department has now denied the request for an extension of the comment period.
Commencing the House’s action, while considering the Labor, Health, Human Services, Education, and Related Agencies Act of 2024 (H.R. 5894), the House on November 14 approved by voice vote an amendment sponsored by Rep. Rick Allen (R-GA) that would Prohibits the Department of Labor from using any funds allocated to the agency “to finalize, implement, or enforce the proposed rule entitled ‘Retirement Security Rule: Definition of Fiduciary Investment Advice’ or any substantially similar rule.”
The House also added two additional amendments that would prevent implementation of the proposed directives. One sponsored by Rep. Ann Wagner (R-MO) would prohibit the Department of Labor “from using funds to finalize, implement, or enforce proposed amendments to the category of Prohibited Transaction Exemptions (PTEs) available to investment advice fiduciaries.” The amendment introduced by Rep. Ralph Norman (R-S.C.) would prohibit funding “to implement actions described in a White House fact sheet on cracking down on unwanted fees in retirement investment advice.”
H.R. 5894 also includes a provision (Section 118 of the bill) that prohibits the Department of Labor from using any funds to “administer, implement, or enforce” the so-called ESG rule, which formally carries “prudence and fidelity in selecting plan investments and exercising shareholder rights,” which was published In December 2022.
Threat of veto
As of midnight last night, the House was still considering amendments to the broader Labor, Health, Human Services, and Education Department spending legislation (H.R. 5894). The House of Representatives is expected to hold a vote on HR 5894 later today (November 15).
Even if the House approves H.R. 5894, the Biden administration’s Statement of Administrative Policy (SAP) has declared that President Biden strongly opposes the legislation and, if brought to him in its current form, would veto it.
The seven-page SAP offers several reasons for the administration’s opposition to the bill, including that it would prevent the Labor Department from using funds to “administer, implement, or enforce rules that provide critical protections for workers’ wages and retirement plans.” The SAP was issued before the fiduciary rule amendments were added to the legislation, but it seems fair to say that the threat of a veto also applies to those provisions.
Meanwhile, in addition to the Biden administration’s opposition to the legislation, H.R. 5894 faces an uphill battle in the Senate, where Democrats hold a slim majority. Note that H.R. 5894 is one of 12 separate appropriations bills that seek to fund various departments of the federal government for fiscal year 2024, which began on October 1. It is separate from the continuing resolution also passed by the House that would temporarily fund the budget. government until January 2024.
Comment extension rejected
Meanwhile, a request by several trade organizations to the Department of Labor to extend the suspension period for another 60 days was denied. As such, comments on the proposed regulation must still be submitted by January 2, 2024, as originally proposed.
Additionally, the Joint Deals Response Letter indicates that the public hearing will be held beginning December 12, 2023 – 39 days from the date the proposal is published in Federal Register. The motion itself states that the hearing will be held “approximately 45 days” after the decision is issued Federal Register Publication date, so the message actually Accelerates date of the session rather than extending it at all.
“The DOL denied the extension request citing significant public input since 2010 and informal interactions with stakeholders since the beginning of the Biden administration. But the reality is that the industry didn’t know until Halloween what this key rule would actually say,” Allison explained. Willowpop, general counsel of the American Retirement Association. “And while I have no doubt that 13 years of evolving guidance has brought a significant portion of the regulated community to DOL’s doorstep, it is certain that not all those interested have had the same opportunities to have their voices heard, for one reason or another.”
The proposed guidance, which the Labor Department called the Retirement Security Rule, which defines who is a fiduciary for investment advice for purposes of ERISA, was first announced by President Biden at a White House ceremony and on October 31, and was published in Federal Register On November 3.
The Department of Labor also published on November 3 proposed amendments to Prohibited Transaction Exemption 2020-02 (Improving Investment Advice for Workers and Retirees) and several existing administrative exemptions from the prohibited transaction rules applicable to fiduciaries under Title I and Title II of ERISA.