After denying extension, DOL announces 2-day fiduciary rule hearing this week

Proponents and opponents of the Department of Labor’s proposed fiduciary rule will have their first official opportunity to share their views on the legislation during two days of hearings this week.

According to DOL’s published agenda for the hearings, more than 40 individuals and representatives of organizations are scheduled to testify during the hearings beginning at 9 a.m. ET December 12 and closing the afternoon of December 13. The hearings will be streamed via webcast.

American Benefits Council Senior Vice President of Global Retirement and Compensation Policy Lynn Dudley is scheduled to be the first to testify Tuesday. Following Dudley will be American Retirement Association CEO Brian Graff. In ARA’s request to testify, the association said Graff will focus on the applicability of the rule and related proposed amendments to prohibited transaction amendments to small retirement plans and service providers to those plans.

Dana Muir, a professor of business law and expert on the Employee Retirement Income Security Act of 1974 (ERISA), will join the first panel. In her request to testify, Muir said she plans to discuss the proposed rule’s foundation in ERISA’s language, the importance of Department of Labor regulation of retirement plan assets, gaps in protections provided by other rules on investment advice, issues she has identified in her academic work on rollovers to IRAs, and responses to industry criticisms of the rule.

Also scheduled to testify on day one of the hearings is the Financial Services Institute (FSI), represented by Mark Smith, Of Counsel, at Eversheds Sutherland. FSI has been critical of the proposed rule, saying it is concerned about the rule’s potential negative impact on Main Street Americans’ access to financial advice as they save for retirement.

“Introducing more conflicting regulations would be unnecessary and could potentially hinder middle-class Americans’ ability to achieve a financially secure retirement,” FSI said in a statement.

The Consumer Federation of America supports the proposed rule. In a statement last month, CFA said conflicts of interest among many investment professionals and firms take a huge toll on the ability of millions of workers and retirees to have a financially secure and dignified retirement.

“The current rules need to be modernized to close loopholes that allow investment professionals and firms to put their own financial interests ahead of retirement investors’ best interests,” CFA said in a statement. Micah Hauptman, director of investor protection, is scheduled to speak on behalf of CFA Tuesday.

David Certner, legislative counsel and legislative policy director, will testify on behalf of AARP. In its request to testify, AARP said it believes enhanced protections for retirement savers and leveling the playing field among financial advisers is critical. “This rule addresses this by extending fiduciary requirements to rollover advice, closing regulatory gaps for non-securities products, and covering recommendations to employers,” it said in a statement.

Calling the proposed rule “retirement insecurity legislation,” the Insured Retirement Institute (IRI) said new requirements on financial professionals will needlessly cause millions of lower- and middle-income workers to lose access to the financial advice they need to help prepare for retirement.

“This proposal is inconsistent and incompatible with President Biden’s stated priorities and the goal of Bidenomics to grow the economy from the middle out and bottom up by investing in all of America, empowering workers, and lowering costs for families,” said Wayne Chopus, president and CEO of IRI, who is scheduled to testify Tuesday afternoon. “Ironically, the President is labeling this proposal as ‘retirement security,’ when it will actually worsen the existing retirement insecurity of millions of workers and retirees.”

Day two of the hearings will feature comments from the National Association for Fixed Annuities (NAFA), which described the proposed rule as misguided. In response to the proposed rule, NAFA’s CEO Chuck DiVencenzo said, “It appears that the administration’s ‘fact sheet’ is really a fiction sheet due to its incendiary language, misinformation and complete ignorance of the role insurance products play in mitigating retirement risks for everyday Americans. To use false and misleading narrative about ‘junk fees’ to ratchet up rhetoric in an attempt to dictate what products and services are normalized for retirement savers is both dangerous and harmful, particularly to consumers who can benefit most from strategies that protect and promote a more secure retirement.”

DiVencenzo is scheduled to testify Wednesday morning.

In support of the proposed rule, the Public Investors Advocate Bar Association promised to provide examples of American investors who have been harmed and explain how this rule change would benefit those investors going forward. Joseph Peiffer, incoming president of PIABA and founding partner or the law firm Peiffer Wolf Carr Kane Conway & Wise, previously said in a statement: “Retirees deserve good advice enabling them to live a long and happy retirement, not advice that serves their broker’s interest in making large commissions. The DOL rule, which imposes a fiduciary duty on advisors, ensures that advisors will have to put retirees ahead of commissions.”

National Pension Partners, represented at the hearing by CEO Nick Paleveda, has called the proposed rule ‘un-workable’ and ‘misleading.’

Related: What’s the impact of DOL’s new fiduciary rule? A Q&A with Colonial Surety’s Richard Clarke

“Our empirical evidence showed that individuals and corporations set up of new plans reduced by 40% when advisors were confronted by this rule,” he said in his request to testify. “In practice – it hurts the consumer as less small companies and individuals set up plans for retirement. If the objective is to have only large companies and the U.S. government have retirement plans – I would vote for this rule. But if you support small companies and small business owners – I would vote against this rule.”

The Biden Administration announced the Retirement Security Rule Oct. 31, saying it would reduce junk fees and increase competition in the retirement investment advice space. A large group of trade organizations requested that the DOL extend the comment period for the proposed Retirement Security Rule, but their request was denied. Several of those signers noted their continued dismay over the length of the comment period in their requests to testify.

Written comments in the matter are due January 2, 2024.