Comment letters on the Department of Labor's proposed fiduciary rule poured in July 21, the last day of the comment period.
The department received 2,254 letters in all, with many groups representing retirement plan investment and service providers warning that while they support a standard that protects clients' best interests, new rules to ensure that in specific situations would be unworkable.
Others, like the ERISA Industry Committee, which represents large employers on benefits issues in Washington, said in its letter that more changes were needed to avoid increasing regulatory burdens, costs and uncertainty among plan sponsors, plan participants and service providers. ERIC called for the DOL to be clearer about which employees of a plan sponsor can offer investment advice to other employees.
Also chiming in were members of Congress. In a letter sent to Secretary of Labor Thomas Perez, Rep. Maxine Waters, D-Calif., ranking member of the Financial Services Committee, and Bobby Scott, D-Va., ranking member of the Education and Workforce Committee, along with a dozen other Democratic House members, called for a new standard to address IRA rollover advice and other recent practices.
The members said they expect the DOL to address “any legitimate concerns” raised, but “we also believe that some of the claims and objections that have been raised are overstated or outright false,” particularly claims that the proposed rule will harm small savers.
In their own letter to Mr. Perez, Republican members on the House Education and the Workforce Committee asked the DOL to withdraw the proposed rule.
Citing concerns that it will “cut off vital financial advice” for low- and middle-income families and small business owners, the GOP members said the rule, as proposed, would ban “some of the most basic advice,” such as rolling over assets from 401(k) accounts.
Hearings on the DOL proposal will be held the week of Aug. 10. The public comment period will reopen for up to 45 days after the hearing transcript is published in the Federal Register.
In a July 21 letter, BlackRock Inc. executives argued the proposal's “critical flaw” is that it is not tailored to address problem areas such as rollovers of individual retirement accounts, and might not facilitate more retirement savings as intended.
“We believe that the structure and burdens imposed by the proposal will create a regulatory environment that is inconsistent with our shared goal and will produce the opposite of the intended effect,” wrote Barbara Novick, vice chairwoman, and Patricia Anne Kuhn, managing director in the legal and compliance department at BlackRock. They called for clarifications that would allow for investment alternatives education, a streamlined “best interest contract,” and expanded exceptions for existing market practices. They also called for the Securities and Exchange Commission to be the first agency to produce a uniform standard for retirement and individual investment accounts.
The Securities Industry and Financial Markets Association's asset management group said in one of eight letters submitted by the group that its members already are fiduciaries when they act as discretionary investment managers or provide investment advice to employee benefit plans subject to ERISA, but the proposal “will restrict asset managers' ability to provide information” and services. Money managers and investors deemed sophisticated “will be burdened by standards designed for retail retirement savers,” and “plan performance may suffer, as asset managers and their offered products become restricted.”
“We agree with the DOL that more can be done to help Americans save for retirement and that there should be a best interests standard in place,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO, in a statement. He added, however, “we believe DOL is the wrong regulator to be in the lead here and the rule as written completely misses the mark.”
In its letter, the CFA Institute said that despite concerns raised by some industry participants about potentially limited service to some parts of the retirement investment market, the institute “believes the proposal does a good job of accommodating various business models while still requiring investment service providers to act in their clients' best interest.”
Mr. Perez defended the proposed rule July 21 during a Senate Health, Education, Labor and Pensions Subcommittee on Employment and Workplace Safety hearing. “The problem in our system is that (the current system) incentivizes complexity ... because complexity generates more fees.”
For their part, officials at the U.S. Chamber of Congress believe the DOL should switch to negotiated rulemaking to produce a new fiduciary standard.
“The rule right now is obviously unworkable,” said Alice Joe, managing director of the organization's Center for Capital Markets Competitiveness, during a July 20 news conference.