The Senate has introduced three bills as companion legislation to the House’s “Roskam-Neal-Roe-Larson” legislation introduced in December. Sen. Johnny Isakson (R-GA) introduced the companion bill to H.R.4293, the ERISA-based fiduciary alternative. Four GOP Senators—Mark Kirk (R-IL), Tom Cotton (R-AR), Steve Daines (R-MT) and Roger Wicker (R-MS)—joined as original cosponsors to S.2502. Sen. Mark Kirk (R-IL) introduced S.2505, the companion bill to H.R.4294, the tax piece of the legislation. GOP Senators Isakson, Kelly Ayotte (R-NH), Cotton and Wicker cosponsored this bill. Sen. Roy Blunt (R-MO) introduced, S.2497, the companion bill to H.R.1090, the House-passed measure that would stop DOL work on the fiduciary issue until after the Securities and Exchange Commission (SEC) acts on it. The GOP cosponsors of this bill include Senators Mike Crapo (R-ID), Daines, Kirk, Isakson and Shelley Moore Capito (R-WV).
Additionally, the House Education & Workforce and the Ways & Means Committees approved legislation that would impose a best interest standard on financial advisors but under a set of workable rules. Three Democrats – Reps. Richard Neal (MA), John Larson (CT) and Mike Thompson (CA) voted with the Committee Republicans to approve the measure. The House will likely pass the legislation but with few Democrats and so it is unlikely to survive a veto.
Background: The Department of Labor (DOL) has sent the final version of the proposed regulation to the Office of Management and Budget (OMB) for a required economic impact review before the DOL can finalize and publish their regulation. Despite assurances from the DOL that they have heard, understood and have addressed the numerous concerns of Congress, retirement savers and industry leaders, there is little confidence that the DOL has gotten it right.
Congress’ efforts to defund the DOL through the Appropriations process were not successful at the end of 2015, largely because the President put enormous pressure on Democrats to reject such efforts. As a result, the House and Senate have introduced this legislation that would require that advice be in the best interest of the recipient while protecting their choices in how to engage and compensate their advisors.
Next Step: The Senate bills do not currently have any Democrat co-sponsors, and the House bills have only three Democrats. The President and DOL Secretary Perez have urged Democrats to “wait and see” the final regulation before considering alternative legislation. Wait and see is not an effective strategy for a rule that will be final when published, and effective only eight months later. Some Democrats understand that they would need to move legislation swiftly if the DOL rule is once again unworkable, but ignore how little time is available to fix a bad rule.
An Appropriations rider this year is still a long-shot possibility. Additionally, the Congressional Review Act allows Congress to vote to reject a regulation, but the last time Congress did reject a regulation was 1996, so also a long-shot. Finding a “must-pass” legislative vehicle is difficult given the current climate in this Presidential election year. Getting a veto-proof majority in the Senate is challenging as well.
NAIFA continues to pursue every possible strategy to assure retirement savers are not harmed by the DOL regulation, but we also recommend that advisors educate themselves on the general provisions of the rule as proposed, organize and update their client databases to identify which accounts/clients will be impacted, and work with their financial institutions to develop implementation processes.
The timing could not be more critical for you to do your part. Join us in Washington, DC on May 24-25 for our annual Congressional Conference. During this exciting, extremely valuable and very fun event, NAIFA members from around the nation will educate their Congressional delegations on key financial security issues, especially the DOL legislative alternative.A limited amount of financial support remains available, so interested NAIFA members should act soon to sign up to participate in this event. To register and/or find more information, visit NAIFA.org/events/congressional-conference.