The U.S. Capitol in Washington.
A group of mostly GOP lawmakers in the House and Senate May 15 introduced resolutions to overturn the Labor Department’s new rule amending the definition of a fiduciary.
The rule, finalized April 23, changed the test used to determine when someone is an investment advice fiduciary under ERISA. The changes make it so one-time advice, such as rollovers to IRAs or annuity purchases, must be in an investor’s best interest.
The Congressional Review Act allows Congress to disapprove a final rule issued by a federal agency, with a simple majority vote, if the rule has not been in effect for more than 60 legislative days.
Sens. Ted Budd, R-N.C.; Joe Manchin, D-W.Va.; Roger Marshall, R-Kan.; and Bill Cassidy, R-La., who serves as the top Republican on the Senate Health, Education, Labor, and Pensions Committee, are leading the resolution in the Senate, which has 12 Republican co-sponsors.
Rep. Rick Allen, R-Ga., is sponsoring the companion resolution in the House, with support from House Education and the Workforce Committee Chair Virginia Foxx, R-N.C.
“The Biden administration’s latest executive overreach would make it harder for working families to invest and prepare for their financial future,” Sen. Budd said in a May 15 news release.
Manchin, the only Democrat supporting either resolution as of now, said the rule is “yet another example of dangerous federal overreach,” according to the news release.
“While I understand the administration’s intent to protect Americans’ retirement savings, the truth of the matter is this does the exact opposite,” Manchin added. “If allowed to go into effect, the rule has the potential to cause many West Virginians to actually lose access to investment advice due to how broadly the rule defines fiduciary.”
Many industry groups have also been critical of the new rule, and the Insured Retirement Institute, a trade association for the retirement industry, said it supports the CRA resolutions.
"The final rule creates significant hardships for today's workers and retirees, making it much more expensive and complicated — and for many consumers, impossible — to access reliable professional guidance," Wayne Chopus, IRI's president and CEO, said in a statement. "That is why IRI supports the passage of a CRA resolution. Congress must disapprove the final rule to prevent the deepening of the retirement savings gap and the establishment of unnecessary barriers for workers to overcome as they seek a secure and dignified retirement."
IRI is also one of 13 organizations that sent a letter of support to the senators leading the resolution. Other signatories include the American Council of Life Insurers, American Securities Association, Financial Services Institute, Indexed Annuity Leadership Council, National Association for Fixed Annuities and National Association of Insurance and Financial Advisors.
The Investment Company Institute, an association representing regulated funds, also approves of the resolutions, according to a spokesperson.
“ICI is concerned that the rule will reduce access to financial advice and will limit investor choice, ultimately impairing the retirement savings of millions of Americans,” the ICI spokesperson said in a statement.
On May 2, the Federation of Americans for Consumer Choice, which represents annuity and life insurance firms, and five insurance agents and firms collectively filed a lawsuit against the rule in the U.S. District Court in Tyler, Texas. The plaintiffs argue the rule violates the Administrative Procedures Act and are seeking a preliminary injunction, asking the court to stop the rule from taking effect while the case is pending.
