Congressional Republicans Oppose DOL Proposal of New Fiduciary Rule

Representative Virginia Foxx, R-Virginia, and Senator Bill Cassidy, R-Louisiana, published on Thursday a public letter to Julie Su, the acting director of the Department of Labor, discouraging the department from proposing a revised 3(21) fiduciary rule.

Foxx serves as the chair of the House Committee on Education and the Workforce, and Cassidy as the ranking member for the Senate Committee on Health, Education, Labor and Pensions.

The letter criticized the DOL for creating confusion and excessive compliance costs by revisiting 3(21) fiduciary standards too frequently: “Over the last two years, the Department has espoused at least three separate positions on what it means to be an investment advice fiduciary. By failing to articulate itself consistently, the Department has created unnecessary instability for retirement plans, retirees, and savers.”

The legislators also referenced the 2016 fiduciary rule vacated by a decision from the 5th U.S. Circuit Court of Appeals in 2018. The 2016 rule would have defined advisers who recommend a plan for an individual retirement account rollover as ERISA fiduciaries. The rule was voided by the 5th Circuit on the grounds that rollovers are not normally part of an ongoing or continuing advisory relationship. The advice is typically given only once and not on a “regular basis.”

In the letter, the policymakers recommend that the DOL focus its resources instead on implementing the regulatory agenda proscribed in the SECURE 2.0 Act of 2022. Updating the fiduciary rule again would only create unnecessary uncertainty for fiduciary advisers and damage Americans’ retirement savings, Foxx and Cassidy argued.

The DOL has not given any sign that it will halt in amending the 3(21) rule. It previously wrote that a proposed amendment with “additional protections” would “deliver substantial gains for retirement investors and economic benefits that more than justify the costs” of the regulation.

The department published its Spring Regulatory Agenda in June and set August as a self-imposed deadline for proposing a new rule. That deadline has come and gone, but regulatory agendas often hold more aspirational or check-the-box value than serving as an actual timetable.