Following comments received after its initial proposal last year, the Employee Benefit Security Administration (EBSA) withdrew the proposal and announced it would solicit more information before making a new one (see “EBSA to Re-Propose Definition of Fiduciary Rule”).
In a hearing about the DoL’s budget proposal with the House Education and Workforce Committee, Rep. Robert E. Andrews (D-New Jersey) asked Solis why the DoL withdrew its original proposal. Solis said the agency received a number of comments and letters expressing concerns about the original proposal, so it is looking to see if it can create a better process. “We don’t want to be rushed into a situation where we are not actually doing our due diligence,” Solis stated.
Representative July Biggert (R-Illinois), asked if the re-proposal would be issued in May as previously estimated, and Solis said she isn’t sure. “At this time we are still collecting data.”
The Wrong Questions
Rep. Rush Holt (D-New Jersey) expressed concern that the department is asking the wrong questions and won’t get the information that will lead to how employees actually make decisions, what can be done to help people prepare for retirement and how to increase access to advice. “Are you finished gathering information? I hope not,” Holt said.
Solis emphatically said the department is not finished gathering information and definitely wants more comments. “We’re not in a hurry,” she reiterated.
Holt added: “Your goal here is to provide greater access to advice so that people will be better prepared for their non-wage-earning years. It is not advice for its own sake.”
Solis replied: “We are on the same page; that’s why we’re taking public comment. If there are stakeholders you feel we should talk to, let us know.”
Changes in the Re-Proposal
Biggert noted to Solis that in a prior hearing, EBSA Secretary Phyllis Borzi said the new proposal will seek to expand liability for companies that service IRAs and retirement plans. Solis responded that she could only say the rule will make sure there is a balance; that those giving advice to retirement plan participants will have a clear line for what constitutes a conflict of interest.
Rep. Phil Roe (R-Tennessee) stated he is not clear on what problem for small investors the DoL is trying to fix. Solis responded that the department is looking to protect retirement savings because it found conflicts of interest with some firms or individuals that are providing advice for a fee.
“But the amount of information you ask for, why do you need that?” Roe asked.
“We do get cases in EBSA where individuals were told where to invest and were told wrong and lost their savings,” Solis responded.
Roe, still not convinced there is a big problem, said: “I’d like to see these cases, because … one or two or three cases, yes you have crooks. We have laws against robbing banks and people still do it. Dishonest people are going to do dishonest things, but most of the brokers I’ve dealt with are not dishonest. They are trying to share with small investors some advice so they can invest their 10 or 15 or 20 thousand dollars.”
When asked by Biggert how the new proposal will be significantly different, Solis said that because the department was in the rulemaking process, she could not say.
Coordination Among Agencies
Solis responded to Biggert’s concerns about the DoL coordinating with the Securities and Exchange Commission (SEC) by saying the department definitely plans to coordinate with the SEC as well and the Commodities Futures Trading Commission (CFTC). However, when asked if the department would consider a joint request for information (RFI) with the SEC, Solis replied: “I couldn’t say at this point. I don’t have all the materials, and we are currently in the rulemaking process. I can only speak on this issue with limitations because of the Administrative Procedures Act.”
Rep. Carolyn McCarthy (D-New York) also expressed concern about coordination among agencies. She pointed out that the SEC has no timeline for a fiduciary rule, but the DoL has made a timeline. "I think it’s time, to be very honest with you, for many of us, the members of Congress, to sit down with the heads [of the departments] and try to figure out how we’re going to go on this. I think it’s really very important because this has been dragging on now for quite a long time. It’s not good. Businesses need to know what they’re going to be doing. Certainly we, many of us here on this particular committee, many on the Financial Services Committee, would like to work together and see if we can come to some sort of resolution in the near future," said McCarthy.
Solis assured McCarthy that Borzi has confirmed discussions among the departments that are going on. “Because of the enormous response that has come out, we want to get all the information we can,” Solis said. “[We] are working on it, but don’t want to be hurried because we want to be sure we have done a good job.”
A recording of the hearing is available at http://edworkforce.house.gov/Calendar/EventSingle.aspx?EventID=284863.