It’s been a couple of fast-moving days for the Department of Labor’s (DOL) proposal to amend the definition of investment advice fiduciary, as the House GOP has stepped up efforts to block the DOL from implementing its proposal, while the department has now denied a request to extend the comment period. 
Starting with the House action, during consideration of the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act, 2024 (H.R. 5894), the House on Nov. 14 approved by voice vote an amendment sponsored by Rep. Rick Allen (R-GA) that would prevent the DOL from using any funds appropriated to the agency to “finalize, implement, or enforce the proposed rule entitled ‘Retirement Security Rule: Definition of an Investment Advice Fiduciary’ or any substantially similar rule.”
The House also added two additional amendments that would block implementation of the proposed guidance. One sponsored by Rep. Ann Wagner (R-MO) would prohibit the DOL from “using funds to finalize, implement, or enforce proposed amendments to class prohibited transaction exemptions (PTEs) available to investment advice fiduciaries.” An amendment offered by Rep. Ralph Norman (R-SC) would prohibit funding “to carry out the actions described in the fact sheet released by the White House related to cracking down on junk fees in retirement investment advice.”
H.R. 5894 also includes a provision (Section 118 of the bill) that would prohibit the DOL from using any funds to “administer, implement, or enforce” the so-called ESG rule, formally titled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” which was published in December 2022.
Veto Threat
As of midnight last night, the House was still considering amendments to the broader Labor, HHS and Education spending legislation (H.R. 5894). The House on Nov. 15 did resume consideration of H.R. 5894, but further proceedings on the legislation have since been postponed.
Even if the House approves H.R. 5894, a Statement of Administration Policy (SAP) released by the Biden administration announced that President Biden strongly opposes the legislation, and if presented to him in its current form, he would veto it.
The seven-page SAP provides numerous reasons the administration opposes the bill, including that it would prevent the DOL from using funds to “administer, implement, or enforce rules providing critical protections of workers’ wages and retirement plans.” The SAP was released prior to the fiduciary rule amendments being added to the legislation, but it seems fair to say that the veto threat also applies to those provisions.
Meanwhile, in addition to the Biden administration opposing the legislation, H.R. 5894 faces an uphill battle in the Senate, where Democrats maintain a slim majority. Note that H.R. 5894 is one of the 12 separate appropriations bills that seek to fund various departments of the federal government for fiscal year 2024, which began on Oct. 1. It is separate from the continuing resolution the House also passed that would temporarily fund the government until January 2024.
Comment Extension Denied
Meanwhile, a request to the DOL by several trade organizations to extend the comment period by another 60 days was denied. As such, comments on the proposed regulation are still due by Jan. 2, 2024, as originally proposed.
In addition, the response letter to the joint trades indicates that the public hearing will take place starting on Dec. 12, 2023—39 days from the date the proposal was published in the Federal Register. The proposal itself said the hearing would take place “approximately 45 days” following the Federal Register publication date, so the letter actually accelerates the hearing date rather than extending it at all.
"DOL rejected the extension request citing significant input from the public since 2010 and informal interactions with stakeholders since the start of the Biden administration. But the reality is that the industry did not know until Halloween what this major rule would actually say," explained Allison Wielobob, General Counsel of the American Retirement Association. "And while I don’t doubt that 13 years of evolving guidance has brought a good part of the regulated community to DOL’s doorstep, certainly not all who are interested have had the same opportunities to make their voices heard, for one reason or another."
Dubbed the retirement security rule by the DOL, the proposed guidance defining who is an investment advice fiduciary for purposes of ERISA was first announced by President Biden at a White House ceremony and Oct. 31, and was published in the Federal Register on Nov. 3.
The DOL also published Nov. 3 the proposed amendments to Prohibited Transaction Exemption 2020–02 (Improving Investment Advice for Workers & Retirees) and to several other existing administrative exemptions from the prohibited transaction rules applicable to fiduciaries under Title I and Title II of ERISA.
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