Lawmakers Tell DOL to Cease Work on New Fiduciary Rule

Top lawmakers on the Senate Health, Education, Labor and Pensions (HELP) Committee and the House Education and the Workforce Committee told Acting Labor Secretary Julie Su on Thursday to "cease further action" on a new fiduciary rule.

Sen. Bill Cassidy, R-La., ranking member of the HELP Committee, and Rep. Virginia Foxx, R-N.C., chairwoman of the Education and the Workforce Committee, told Su in a letter that they oppose Labor's continuing efforts to promulgate a rule on "Conflict of Interest in Investment Advice" to revise the definition of fiduciary under Section 3(21) of the Employee Retirement Income Security Act.

"Over the last two years, the Department has espoused at least three separate positions on what it means to be an investment advice fiduciary," the lawmakers wrote. "By failing to articulate itself consistently, the Department has created unnecessary instability for retirement plans, retirees, and savers."

Labor's "misguided efforts to revise the definition of investment advice fiduciary have created confusion in the marketplace and unwarranted compliance expenses," the lawmakers continued.

For instance, they pointed to the recent opinion by the U.S. District Court for the Southern District of New York criticizing the Department "for its shifting interpretations on fiduciary investment advice."

Specifically, the lawmakers pointed out that the Court stated, "How, then, should the Court interpret the investment advice fiduciary provisions in light of DOL's shifting interpretations? There is no DOL interpretation binding on this court."

Said the lawmakers: "As Biden's DOL continues to change its stance in this area, we remind the Department of its attempt to promulgate a definition of fiduciary under ERISA section 3(21) in 2016. This ill-conceived and overreaching rule was decisively vacated by the U.S. Court of Appeals for the Fifth Circuit, and it should serve as a cautionary example."

Where a New Rule Stands Now

The lawmakers stated that they request Labor "cease further action on this rulemaking. We look forward to your prompt attention to this matter and to your response to this letter."

Labor's spring regulatory flexibility agenda signaled that a new fiduciary rule would be released in August. Reg flex agendas are placeholders and may not reflect the agency's actual timetable.

But Lisa Gomez, assistant secretary of Labor for the Employee Benefits Security Administration, said in May that issuing a new fiduciary rule was a "huge priority" for Labor, noting that one should be released soon.

Brad Campbell, a former head of EBSA who's now a partner in Faegre Drinker's Washington office, opined on the firm's recent Inside the Beltway webcast that because a new rule has yet to hit the Office of Management and Budget for review, it's "still very much in flux."

Pictured: The U.S. Capitol in Washington, D.C. Photo: Bloomberg