Fiduciary Hearings: The ‘After’ Math
Renowned French author André Gide once famously remarked, “Everything that needs to be said has already been said. But since no one was listening, everything must be said again.” So it felt at times during Day Four of the Department of Labor’s (DOL) public hearing on its fiduciary rule.
To be fair, some new topics were discussed in the final day of testimony. For instance, various groups representing certain types of alternative investments, like hedge funds, non-publicly traded real estate investment trusts (REITs) and non-publicly traded business development companies (BDCs), complained to the DOL that the Best Interest Contract Exemption (BICE) would not be available to advisers that receive compensation from the purchase, sale or holding of certain equity securities that are option contracts, limited partnership interests or not publicly traded.
Additionally, groups representing appraisers also complained during the final day of testimony about the fact that, even though the reproposed rule carved out valuation services provided to employee stock ownership plans (ESOPs), it still covered valuations involving the purchase, sale or exchange of other property by ESOPs and other ERISA-covered plans.
But these presentations were a sideshow compared with some of the testimony from individuals and groups fully committed to killing the regulatory project. For example, Kent Mason, a partner at Washington, D.C. employee benefits law firm Davis & Harman LLP, issued a broadside against the rule that made for some intriguing political theater. Mason stated flatly that there were so many problems with the reproposal that “there is an infinitesimal chance that the DOL will get it right” in the final rule given all the changes that need to be made.
Additionally, testimony by Bradford Campbell, an ERISA attorney with Drinker Biddle & Reath (and former Assistant Secretary of Labor), who represented the U.S. Chamber of Commerce, reads like a comprehensive brief for a future lawsuit against the DOL’s authority for issuing a rule that extends to IRAs.
So now the public hearing is over. What comes next? The DOL has already started to provide video of the public hearing
, along with the written testimony and hearing-related materials submitted to the DOL. In addition, the DOL has now reopened the public comment period
for stakeholders to submit additional comments in light of what was discussed during the public hearing. This comment period will last from now until 15 days after an official transcript is issued publicly (a process that is likely to take at least two weeks).
What was learned? It seems that the main takeaway the DOL took from the public hearing was that there were so many disparate and divergent views on what to do that it will be impossible to please everybody. In his closing remarks, EBSA’s Deputy Assistant Secretary for Program Operations Tim Hauser, admitted as much, concluding that stakeholders had trouble even articulating what should be done, let alone giving the DOL clear guidance on how to achieve the goal of creating an appropriate standard of care for the provision of investment advice for retirement accounts.
But given the political pressure from President Obama and Labor Secretary Thomas Perez, what is clear is that the DOL will continue to plow ahead with a final rule in the coming months. And unless Congress intervenes (which seems unlikely – imagine legislation getting through both houses of Congress with enough support to overcome President Obama’s near-certain veto), the retirement industry will have to live with and adapt to a new fiduciary world in the coming years.Andrew Remo is the American Retirement Association’s Manager of Congressional Affairs.