Removing Barriers Blog

Department of Labor Holds a Public Hearing on Proposed Fiduciary Rules
Posted August 13, 2015 by CUNA Advocacy

This week the Department of Labor (DOL) held a public hearing for four consecutive days concerning its proposed regulation defining who is a “fiduciary” of an employee benefit plan under Employee Retirement Income Security Act of 1974 which includes adding brokers and advisers providing advice to individual retirement accounts to the definition. CUNA has previously expressed concerns that this rule could impact the ability of credit unions to offer retirement products and services to members.

During the hearings both sides of the debate were represented, with panels of impacted industries and interest groups testifying, and DOL officials questioning the panels. Throughout the hearing DOL officials appeared to remain intent on moving forward with the rule. But, the different panelists who were critical of the rule put forward a multitude of concerns with it, arguing among other things, that the rule would give investors less choice and increase their costs. There were also extensive discussions about the utility of the best interest contract exemption, and deep criticisms of it. Additionally, many panelists suggested that the DOL needs to simplify how it treats compensation in its rule.

A number of panelists also urged the DOL that it would be more practical to better enforce existing laws under the Securities and Exchange Commission and the Financial Industry Regulatory Authority, rather than create new requirements under a new regulator. In the alternative, some advocacy groups testified in support of the rule and argued that it would provide needed reforms.

A number of the panelists expressed similar concerns as those outlined in CUNA’s comment letter on this issue. Specifically, they expressed concerns that the rule will detrimentally impact lower income investors. In our comment, CUNA urged the DOL to consider how the barriers created by rules in this area could negatively impact consumers’ access to retirement and other investment services, particularly for lower net-worth credit union members who may have fewer opportunities to participate in retirement and savings plans. CUNA’s comment also made the distinction that credit unions offering investment services to their members aim to help American families of all means receive information about saving for retirement and planning for their future, while many large investment firms seek high net-worth clients.

The hearing transcript will be made available by the DOL, and the public will have 10 days to comment in response to it after it becomes publically available. CUNA plans to review the transcript, and will likely file additional comments.

The Senate held a hearing about this proposed rule in July and Members of Congress in both the House and Senate have sent letters to the DOL about the rule. This week Labor Secretary Thomas Perez responded to a letter from House Republicans criticizing the rule by defending it and expressing that the agency intends to finalize it.

CUNA is continuing to follow all of the events surrounding the proposed rule, and will be providing the DOL with additional feedback.

Please contact Leah Dempsey with any questions.