The two top Republican lawmakers serving on the House and Senate committees with jurisdiction over ERISA have called on the Department of Labor (DOL) to halt any further changes to the definition of fiduciary. 
The Aug. 31 letter from Rep. Virginia Foxx (R-NC), who is chair of the House Education and the Workforce Committee, and Sen. Bill Cassidy, M.D. (R-LA), who is the ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, urges Acting Labor Secretary Julie Su to cease any further action to amend the definition of an investment advice fiduciary.
“We write to oppose the Department of Labor’s continuing efforts to promulgate a rule on ‘Conflict of Interest in Investment Advice’ to revise the definition of fiduciary under section 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA),” the lawmakers write.
Conflicting Positions?
Additionally, the lawmakers contend that the DOL has taken multiple conflicting positions on the fiduciary rule, which they suggest has “caused serious damage for American savers.”
“Over the last two years, the Department has espoused at least three separate positions on what it means to be an investment advice fiduciary. By failing to articulate itself consistently, the Department has created unnecessary instability for retirement plans, retirees, and savers,” the lawmakers further write.
For instance, they point to a recent opinion by the U.S. District Court for the Southern District of New York (Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 1:21-cv-08384, S.D.N.Y. Sept. 27, 2022), which they argue criticized the DOL for its “shifting interpretations” on fiduciary investment advice, suggesting that this has led the court to disregard the DOL guidance altogether.
“As Biden’s DOL continues to change its stance in this area, we remind the Department of its attempt to promulgate a definition of fiduciary under ERISA section 3(21) in 2016. This ill-conceived and overreaching rule was decisively vacated by the U.S. Court of Appeals for the Fifth Circuit, and it should serve as a cautionary example,” they further assert.
To that end, the lawmakers cite a Hispanic Leadership Fund study that reportedly found that reinstating the 2016 Fiduciary Rule would reduce the retirement savings of 2.7 million individuals with incomes below $100,000 by approximately $140 billion over 10 years and have the greatest adverse effect on Black and Hispanic Americans.
“Not only has the Department’s continually shifting position significantly harmed investors, but it has also wasted taxpayer resources on legal challenges that could be dedicated to other pressing priorities like implementing the recently enacted SECURE 2.0 Act and protecting retirement savers,” Foxx and Cassidy further suggest.
Still on DOL’s Agenda
Meanwhile, the letter from Rep. Foxx and Sen. Cassidy comes after months of speculation regarding if, and when, the DOL will propose a revised rule. The DOL’s Spring 2023 regulatory agenda still shows that a fiduciary rule rewrite could be released this summer, with a targeted August release date (note that these dates are typically ballpark estimates).
The title of the proposed rulemaking has been changed from “Definition of the Term ‘Fiduciary’” to “Conflict of Interest in Investment Advice,” but the proposal (as of this writing) has not yet hit the White House Office of Management and Budget’s regulatory review dashboard.
According to the DOL’s description of the rulemaking, the proposal “would amend the regulatory definition of the term fiduciary set forth at 29 CFR 2510.3-21(c) to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code.”
The summary explanation further explains that the amendment will take into account “practices of investment advisers, and the expectations of plan officials and participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including in the ways advisers are compensated that can subject advisers to harmful conflicts of interest.”
In conjunction with this rulemaking, the DOL’s Employee Benefits Security Administration (EBSA) is also evaluating available prohibited transaction class exemptions and plans to propose amendments or new exemptions to “ensure consistent protection of employee benefit plan and IRA investors.”
The full letter by Rep. Foxx and Sen. Cassidy can be found here.
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