Perez to Congress: Full Steam Ahead on Fiduciary Proposal

Secretary of Labor Thomas Perez used his first appearances before the 114th Congress to deliver a full-throated defense of the DOL’s controversial effort to expand the fiduciary standard of care to financial service providers under the jurisdiction of the department.

Perez appeared at two congressional hearings to discuss President Obama’s 2016 proposed budget for the DOL:

· the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies on March 17; and http://appropriations.house.gov/calendararchive/eventsingle.aspx?EventID=394060

· the House Education & the Workforce Committee on March 18. .

Republican congressional leaders questioned Perez on DOL’s fiduciary rulemaking effort, expressing concerns that limited coordination between the DOL and the SEC could lead to conflicting rules for financial service providers. In response, Perez indicated in the House Appropriations Subcommittee hearing that he had “eight or nine” discussions about the DOL’s efforts in this area with SEC Chair Mary Jo White, though he said he had not had any interactions with any of the other SEC commissioners.

White, for her part, indicated March 17 that the SEC intends to move forward with their own effort to issue new rules regarding the standard of care for financial service providers under their own purview as enforcers of the federal securities laws.

Perez asserted that DOL has clear jurisdiction in this area as enforcer of ERISA, and that DOL will proceed with its rulemaking accordingly after the Office of Management and Budget (OMB) finishes its review of the rule.

During the House committee hearing, responding to similar concerns about DOL’s rulemaking raised by Republican members of the committee, Perez indicated that last month’s White House report, “The Effects of Conflicted Investment Advice on Retirement Savings,” which estimated that “conflicted advice” costs American savers $17 billion each year, likely understated that number — though without providing any specific evidence for that assertion. Perez reiterated to the House committee that DOL has clear jurisdiction to act in this area and will do so given the seriousness of the problem.

Taken together, Perez’s statements this week suggest that when OMB finishes its review of the proposed fiduciary rule sometime in late spring, the DOL intends to move full steam ahead to finalize and implement it before President Obama leaves office in January 2017.

Andrew Remo is the Congressional Affairs Manager at the American Retirement Association.