Labor Department now shooting to issue proposal during the first half of the year; request for IRA info could gum up the works
The Labor Department's plan to repropose a rule that would expand the definition of “fiduciary” for advisers to retirement plans appears to be losing momentum. The agency now aims to issue the proposal, which was scuttled in September, by summer rather during than the first part of the year.
The slow-going may have been exacerbated by a recent DOL request for information from financial industry interest groups. The agency sent a letter on Dec. 15 to industry groups, asking for details about their members' individual retirement account business in order to conduct an “expanded regulatory impact analysis” of the new fiduciary rule. The information was due by Jan. 15.
Among the items in the information request: the rate of return, dividend payments and gains for each account, along with its investment strategy, compensation arrangements, recommendations that advisers made about the accounts, and the account holders' risk appetite and financial literacy.
Financial groups that received the letter, such as the Securities Industry and Financial Markets Association, the Investment Company Institute and the Financial Services Institute Inc., collectively have hundreds of members.
“The expansiveness of the data request reflects our effort to ensure that we have access to all of the best available evidence,” Assistant Labor Secretary Phyllis Borzi, head of the Employee Benefits Security Administration, wrote in an e-mailed statement. “The time frame is designed to give us as much time as possible to digest and analyze any data that is provided to us. We understand that some of the information may not be readily available within the requested time frame.”
When she withdrew the fiduciary rule last fall, Ms. Borzi vowed to introduce a revised version early this year. Now, it appears that the timeline has slipped.
In an e-mail, a Labor Department spokesman wrote that updating the definition of “fiduciary” is a priority for the agency, but didn't provide a specific timeframe.
“We are working to complete our cost-benefit analysis …and plan to have it [the revised rule] out during the first half of 2012,” wrote the spokesman, who asked not to be identified. “As we have said previously, we want to take the time to get this rule right, and we are working diligently to do exactly that.”
The DOL first proposed the expanded fiduciary duty rule in October 2010. It said that the update to federal retirement law was necessary to better protect workers and retirees who must now provide for their own nest eggs through IRA and 401(k) plans.
The rule, which was on its way to being finalized by the end of 2011, was withdrawn after withering criticism from the financial industry and lawmakers. Opponents said the rule was too broad and would subject IRA advisers to a fiduciary duty for the first time, potentially driving brokers out of the market. Skeptics also said that the original rule was a solution in search of a problem and lacked a sufficient cost-benefit analysis.
“Some critics of EBSA's October 2010 proposed rule complained that we had not adequately demonstrated or quantified the harm that can arise when investment advisors' interests conflict with those of the IRA owners they advise,” Ms. Borzi said. “EBSA is responding by assembling a wide array of evidence on this question, and will offer this evidence in connection with the forthcoming proposal.”
