Why Every Battle Matters in the War to Protect Everyone Saving for Retirement.
March 29, 2017
The Department of Labor’s “clients’ best interest” fiduciary duty rule is on the frontlines in the battle over the Trump administration’s mindless de-regulation agenda. While first delaying and then killing the “best interest” rule is a priority for the President, the rule will benefit tens of millions of Americans and has a tireless group of defenders who are still in the fight. Better Markets and its allies in the Save Our Retirement coalition continue to have an impact by forcing the DOL and the OMB to more thoroughly consider the overwhelming arguments against any delay or repeal of the rule; to ensure a fair rulemaking process; and to create a full and complete record that will enable a court to review the agencies’ actions.
Finalized last April, the rule is fundamentally simple: It requires all financial advisers to give advice about retirement assets that is in their clients’ best interest. No longer will advisers be allowed to saddle their clients with lousy investments that carry huge commissions and fees aimed at boosting the adviser’s profits and bonuses. By conservative estimates, these conflicts of interest are costing IRA investors $17 billion a year, and the damage being done to all retirement savers associated with all types of investments is undoubtedly several multiples of that number, totaling $70 billion or more every year. To end this drain on retirement savings, the DOL engaged in a rulemaking process that was as thorough and thoughtful as it could be, including years of consultation with stakeholders, months of public comment, nearly a week of hearings, and ample accommodation to industry in the final version.
But the rule will also require the industry to change its way of doing business, cutting off a steady stream of easy money picked from the pockets of retirement savers since 1975. Hence the ferocious industry opposition. So far, the rule has prevailed, and in fact, three federal district courts have upheld it against every conceivable legal assault, two of them expressly rejecting requests that the rule be delayed pending litigation.
Now the industry opposition has a new ally. Less than two weeks after inauguration, the President launched his attack on the rule with an order requiring the DOL to re-examine it—the first step toward a rewrite or total repeal. Shortly thereafter, the DOL issued a proposal to delay the rule for at least 60 days—a measure that will cost retirement savers tens of millions of dollars with each passing day.
The threat is clear, but so is the strategy for fighting back: Staunchly defend the rule, fully armed with the facts and the law, in every possible venue, including the agencies, the courts, the Hill, and the media. While no ultimate outcome can be guaranteed, we know that this engagement makes a huge difference.
For example, shortly after the delay proposal came out, Better Markets and other groups promptly arranged meetings with the OMB. Those meetings were followed by a barrage of comment letters from Better Markets and other coalition members, all quickly drafted and submitted to DOL within a woefully inadequate 15-day comment period. Those letters all drove home the key points: The rule is critically important for the well-being of every American worker and retiree; there is no factual or legal justification for diluting it or rolling it back; and with every day of delay, retirement savers will suffer enormous losses from their retirement accounts. More comment letters will follow on the specific aspects of the rule that the President has ordered the DOL to re-evaluate.
This advocacy serves many purposes. It forces the OMB and the DOL to pause and more thoroughly consider all of the ramifications of the delay-and-dilute strategy; it highlights the lack of any factual or legal basis for these fresh assaults on the rule; it holds the agencies to the same rulemaking standards that industry insisted upon when they fought the rule; it ensures that the agencies provide a fair and adequate comment period for their proposals; it helps inform the public and raise the profile of the rule; and it puts the agencies on notice that they will be challenged in court if they deviate from what the law requires in the rulemaking process.
As a result of this advocacy, the OMB has already made an important decision to reclassify the delay proposal as “economically significant.” That means that the DOL will have to conduct a more thorough analysis of costs and benefits and provide a more detailed justification for any delay of the rule. Even more important, all of this advocacy will ensure that the rulemaking record is complete, so any court asked to review the final rules has all the information it needs to make an informed judgment under the law.
These are the important battles being waged in the war over the fiduciary duty rule—where gains are still being made by Better Markets and others.