The Department of Labor moved forward with its plans to release a finalized version of its long-anticipated fiduciary proposal, sending a copy of the rule to the Office of Budget Management late Thursday night for review and approval.
Labor Department officials said last fall they planned to publicly release the rule during the first half of 2016. Sending the rule to OMB is the first step in this process.
While no one is certain of what the new rule will look like until after OMB review, it’s expected to require advisors overseeing retirement plans to act under a fiduciary standard, putting client interests ahead of all other considerations when making investment recommendations on accounts covered under the Employee Retirement Income Security Act.
Phyllis Borzi, assistant secretary for the Employee Benefits Security Administration at the Labor Department, said in October that the agency was already considering updating to its proposal in response to the thousands of letters and comments it received.
“It was perfectly obvious when we proposed it that it needed to be simplified and streamlined,” she said. “Even in our meetings and reading the comments of groups and individuals who were completely and totally, and vociferously I might add, opposed to what we were doing, there were nuggets of information that will help us develop a better rule.”
But Borzi warned the government had no plans to strip out the controversial ability for investors to bring litigation to enforce the best interest contract.
Under a 1993 executive order in effect, the OMB’s Office of Information and Regulatory Affairs should complete rules within 90 days, with the option to extend the time an additional 30 days of needed. The OMB's review of the DOL's initial proposal lasted about three months in 2015.
SIFMA President and CEO Kenneth E. Bentsen Jr. urged in a statement released Friday for the OMB to conduct a comprehensive cost benefit review of the final proposed rule, noting the serious consequences it could have for investors.
"The OMB has a statutory mandate to get this right. To do so, it must fully assess the economic impact of the DOL’s rule to ensure it serves the best interest of American investors without making saving harder and causing them undue harm,” he said.