Art by J. Ciardiello“I’ve Got a Little List, And they'll none of 'em be missed”—W.S. Gilbert (of Gilbert and Sullivan)
As has been widely discussed, the Obama Administration’s policy of acting through Executive Order and regulation, rather than through legislation, has left the current Administration’s policies vulnerable to repudiation by the incoming Trump Administration, by identical, unilateral means.
As Department of Labor (DOL) Employee Benefit Security Administration (EBSA) Assistant Secretary Phyllis Borzi famously said, “So what we've done is we've shifted from the way that social change and legal change and financial change is accomplished through congressional action to two different avenues for making changes: The main one being regulation and the second one being litigation.” The problem is, if a new Administration comes into office with different views on “social change,” and is prepared to view lawmaking in a similar way (as a function of Executive rather than Congressional action), it doesn’t take much to undo what’s been “accomplished.”
I want to return to this issue of process at the end. But first, here is my “little list” of Obama DOL/EBSA agency action that I think the incoming Trump Administration should take a serious look at and consider, one way or another, repealing.
The Conflict of Interest regulation. The possible reopening of the Conflict of Interest regulation—which is “final” but not yet applicable—has been getting lots of press. In my humble opinion, the rule’s application of Employee Retirement Income Security Act (ERISA) fiduciary standards to IRAs and the “fiduciary-ization” of advice concerning distributions should be revoked and those issues turned over to the Securities and Exchange Commission (SEC). But repeal is not a no-brainer. There will be considerable opposition and many providers have already taken significant steps to adapt to the new rules. Whoever is running the Trump EBSA will want to make sure that there is broad support for whatever changes are made.
Policy on 401(k) fee issues generally. The Obama EBSA has made 401(k) fees the centerpiece of its retirement plan regulatory efforts, beginning with major fee disclosure regulations in 2010 and 2011 and then the Conflict of Interest rule in 2016. It has also introduced fee issues into other, seemingly unrelated initiatives, including the brokerage window guidance project, the Target Date Fund Tip Sheet and the Pension Protection Act advice regulation.
The Trump Administration will want to reassess the significance of fees as a regulatory issue. Is this “war on providers” really justified, or is price competition better left to the market? NEXT: State plans, an annuity safe harbor and more