More than 20 consumer and investor advocacy groups are urging the Department of Labor to allow more time for public input on a proposal that would revise investment advice standards for retirement accounts.
Last week, the DOL released a proposed regulation that would provide exemptions under the Employee Retirement Income Security Act to allow investment fiduciaries to receive compensation, such as commissions, 12b-1 fees and revenue sharing, that would otherwise be prohibited as long as they act in the best interests of plan participants.
The proposal, which would replace an Obama administration fiduciary rule that was vacated by a federal appeals court in 2018, was published in the Federal Register Tuesday. Public comments are due in 30 days.
In a letter to the DOL Wednesday, 21 advocacy groups called on the agency to extend the deadline to 90 days given the intricacies of the proposal and the ongoing coronavirus pandemic.
“A 30-day comment period is an unreasonably short amount of time to provide thoughtful and comprehensive comments on this complex and highly technical proposal, which would affect our constituencies—including virtually all Americans struggling to save for retirement—in varied and far-reaching ways,” the letter states. “This would be an unreasonably short comment period for such a significant rulemaking under any circumstances, but that is particularly the case given the unprecedented times in which we are living.”
The letter was signed by the Consumer Federation of America, the Financial Planning Association, the National Association of Personal Financial Advisors and the Institute for the Fiduciary Standard, among other groups.
“It’s a ridiculously short time to comment,” said Micah Hauptman, financial services counsel at the Consumer Federation of America. “It’s pretty clear that they’re trying to rush this through. I hope they’ll slow down and give the public a meaningful opportunity to comment, but I’m not optimistic they will.”
A DOL spokesperson was not immediately available for comment.
The groups’ push to extend the comment deadline follows a similar appeal in a July 2 letter to the agency from Sen. Patty Murray, D-Wash. and ranking member of the Senate Health Education Labor and Pensions Committee, and Rep. Bobby Scott, D-Va. and chairman of the House Education and Labor Committee.
It's not likely the DOL will extend the comment deadline because the proposal isn't breaking brand-new ground, said Jennifer Klass, a partner at Baker McKenzie. The latest DOL fiduciary proposal is the third iteration since 2010 and also draws from a 2018 field bulletin released after the Obama rule was killed in court.
"They're not writing on a blank slate," Klass said. "It would be different if they were proposing something for the first time."
The DOL proposal aligns with the Securities and Exchange Commission’s Regulation Best Interest, which was implemented June 30 and sets a new advice standard for brokers. Brokers who comply with Reg BI likely would also comply with the DOL fiduciary proposal when recommending rollovers and giving other retirement investment advice.
The fact that the DOL rule would plug into Reg BI worries investor advocates, who argue that Reg BI is too weak to curb broker conflicts of interest. The fact that Reg BI has just gone into force is another reason to delay the comment period on the DOL proposal, Hauptman said.
“The additional 60 days would allow commenters to see how [Reg BI] implementation goes,” Hauptman said.
The DOL has to move quickly to get to a final regulation in place before the end of the Trump administration’s first term. The longer it takes, the more likely the rule would be overturned if Democrats take the White House.
Those seeking an extended comment period say they're asking the Trump administration to provide the same thing the Obama administration gave to industry critics of the previous rule, whose comment deadline was extended to 90 days.
Rushing the revised rule would show bad faith, investor advocates said.
“To do so would suggest that the Department is not interested in considering these important aspects of the problem it is seeking to address, is not keeping an open mind, and has predetermined the outcome of this rulemaking,” they wrote.
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