Compliance May 5, 2017

Dodd-Frank, Fiduciary Rule Repeal Progresses in Congress

A bill that would repeal much of the Dodd-Frank Wall Street Reform Act and block the DOL fiduciary rule has cleared the House Financial Services Committee. 

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The Financial Services Committee has approved the CHOICE Act for consideration by the full House of Representatives, a move considered by some to be the first real step towards Congressional repeal of Dodd-Frank regulations and the Department of Labor (DOL) fiduciary rule.

The legislation is sweeping and would undue or replace much of the Dodd-Frank Wall Street reforms adopted by Democrats when they held significant majorities in the wake of the 2008-09 financial crisis.

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Interestingly, in the executive summary of the CHOICE Act published by the Republican members on the Financial Services Committee, there is only one very brief, single-bullet-point mention of the DOL fiduciary rule—and this bullet point comes at the very end of the document. It is probably too much to read into that symbolic detail, but the CHOICE Act’s impact on the DOL fiduciary rule, and even on particular elements of Dodd-Frank, could potentially be renegotiated by the full House and Senate.

In the actual text of the legislation there is more detail about how the fiduciary rule will be treated. The CHOICE Act seeks to “repeal the DOL’s fiduciary rule and require the Securities and Exchange Commission (SEC), before promulgating any such rule, to report to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs on whether retail customers are being harmed because broker/dealers are held to a different standard of conduct from that of investment advisers; alternative remedies will reduce any confusion and harm to retail investors due to the different standard of conduct; adoption of a uniform fiduciary standard would adversely impact the commissions of broker/dealers or the availability of certain financial products and transactions; and the adoption of a uniform fiduciary standard would adversely impact retail investors’ access to personalized and cost-effective investment advice or recommendations about securities.”

Additionally, the SEC’s chief economist is “required to support any conclusion in the report with economic analysis.” Finally, it requires the DOL, “if it promulgates a fiduciary rule under ERISA, to substantially conform it to the SEC’s standards.”

NEXT: Financial institutions want CHOICE

Among the advocacy groups and lobbying organizations to commend the progress of the CHOICE Act is the Financial Services Roundtable (FSR), which called the advancement of the legislation “an important first step to improving the regulatory system and promoting economic growth.” FSR signaled it “supports many of the provisions in the Act.”

“Improvements to financial regulations can lead to economic growth, while still protecting taxpayers and consumers,” argues FSR CEO Tim Pawlenty.

In commentary shared with PLANADVISER, Pawlenty explains his group “strongly supports applying a best interest standard to all persons providing personalized investment advice and guidance to all retail investors, not just for advice related employee benefit plans, individual retirement accounts (IRAs) and other entities treated as plans for purposes of the Code—retirement investors.”

However, “for the sake of clarity and transparency,” FSR argues the regulation and oversight of investment advisers, broker/dealers and others engaged in providing personalized investment advice about securities to retirement investors “should be the primary responsibility of the Securities and Exchange Commission.”

Pawlenty further argues the SEC “has the expertise, knowledge and authority to most effectively and efficiently coordinate the myriad of applicable laws and regulations pertaining to such investment activities. State insurance authorities should also take the lead on the regulation of annuities and insurance products, including life insurance companies and their agents or distributors.”

Benefits May 5, 2017

Revised Version of Health Reform Still Lifts Burdens for Employers

After a failed attempt in March, the president managed to get a revised health reform bill passed in the House.
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The U.S. House of Representatives narrowly passed a revised version of the American Health Care Act (AHCA).

So, what changes were made to allow President Donald Trump to get enough votes to pass this time? With the previous version, major hold-outs were members of the conservative House Freedom Caucus who said the proposed bill retained too many elements of the Affordable Care Act (ACA). The Freedom Caucus was especially concerned with provisions regarding essential health benefits.

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James Gelfand, SVP of Health Policy, at the ERISA Industry Committee (ERIC), based in Washington, D.C. says the new bill shored up conservative support by allowing states to impose work requirements in Medicaid, and giving states the option to apply for a waiver to suspend certain ACA insurance rules. Steve Wojcik, vice president, public policy at the National Business Group on Health (NBGH), who is based in Washington, D.C., says an amendment allows states to have flexibility in defining essential health benefits, especially for individual and small group markets. And, according to news reports, states would also have flexibility in making rules for pre-existing health condition coverage.

Gelfand adds that it shored up moderate support by creating a $15 billion invisible high risk pool to help people with high premiums, and an $8 billion fund to help people adversely affected by suspension of community rating rules in their state.

However, research from Willis Towers Watson suggests that employers expect to retain some of the ACA’s popular provisions, “even if they are not required to by a new law.” Julie Stone, a national health care practice leader at Willis Towers Watson, said in a press release, “Employers are more likely to retain some of the popular ACA benefit provisions because of their positive impact on employee engagement and the potential for changes to be viewed negatively in the context of overall rewards.”

NEXT: Positive impact on employers

In a statement, ERIC said the House passage of the AHCA is a positive step forward. ERIC notes the AHCA would help to eliminate many burdens on employers by:

  • Repealing the employer mandate;
  • Repealing numerous taxes that raise the costs of health insurance and health care, such as the taxes on pharmaceuticals, over-the-counter medicines, and limitations on flexible spending accounts; and
  • Further delaying the Cadillac tax.

Wojcik says to the extent individual and employer mandates go away, a lot of reporting that hinges on that will go away. But, he notes it will require additional regulations to undo reporting.

Wojcik adds that ERIC is not expecting and has not heard anything from its members on the issues of state flexibility for essential benefits and pre-existing condition. “They are more interested in the excise tax [on high-cost health plans] being delayed to 2026,” he says.

“The Cadillac tax is really the threat to robust health plans. If it stays in place, it will put pressure on employers to scale back benefits,” Wojcik notes. “It would be a win-win for employers and employees for this to be delayed and ultimately repealed.” ERIC is working with lawmakers to get the tax repealed.

He says it is hard to speculate whether the bill will pass in the Senate, “but from what we’re hearing, the Senate is going to be very deliberate and likely make big changes to it. A vote may take a while." Employee groups and certain non-profits advocacy groups have expressed concerns that many will lose coverage under the new law. And, New York Attorney General A.G. Schneiderman has vowed to challenge the law in court if it passes and is signed by the president.

“We’ve been telling our members that for now nothing changes, and the ACA is the law of land. They have to keep complying,” Wojcik says.

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