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READER POLL: Readers Optimistic, Skeptical About DOL Fiduciary 'Do-Over'

Industry Trends and Research

Last week Secretary of Labor Alexander Acosta appeared to confirm that the Department of Labor will issue a new fiduciary rule. This week, we asked readers to weigh in on that prospect – and its prospects.

Remember that after the 5th U.S. Circuit Court of Appeals struck down the DOL’s previous fiduciary rule last March and the SEC moved forward with its own package, indications were that the SEC would take the lead and the DOL would issue guidance based on the SEC’s final rules. Then Acosta recently appeared before the House Education and Labor Committee for a hearing to examine the policies and priorities of the DOL. While Acosta's written testimony did not address the DOL issuing a new rule, under questioning by Rep. Marcia Fudge (D-OH), he indicated that DOL is in discussions with the SEC as it works on its proposed investment advice rule.

Hope “Scope”

Well, considering the time, effort, and occasional confusion as to the eventual implementation of the fiduciary rule, asked about the notion of the DOL taking another stab at a fiduciary rule update, it is perhaps not surprising that more than half (53%) of this week’s respondents said, “let’s see what they come up with…”. “Not holding out much hope after the implosion of the last rule, but anything is better than nothing...,” noted one reader.

That said, nearly a quarter (24%) opined that it was “long overdue!”, while half that number (12%) thought it was a waste of time, and the rest split between those who “haven’t really thought about it” and those who thought “this is (probably) going to be a problem.”

As for the timing of the initiative, 56% thought “it doesn’t really matter,” while a quarter wanted to “let the SEC go first,” and the rest simply said, “the sooner the better.”

“If you draw the line around assets in the employer-sponsored, tax-qualified plan, it makes no difference when the SEC or states do, so long as they avoid employer-sponsored, tax-qualified plans,” noted one reader. “The SEC has regulated investment advice for a long time and better understand these issues, I think,” commented another. Still another said, “The SEC will likely go first, though, imo.”

State Slate?

We then asked, assuming there is a new fiduciary rule from the Labor Department, what impact (if any) readers thought it might have on the burgeoning involvement of states in establishing their own fiduciary standards. To this, a plurality (41%) were “guessing this DOL's standard won't be "enough" to stave off state involvement,” while 29% thought that the DOL’s effort “should be the end of them.”  Roughly one-in-eight thought there would be no impact, a similar number hadn’t really thought about it, and the rest thought that it would “actually accelerate interest by the states – at least some of them.”

“In a perfect world, that would be the end of the state involvement,” noted one reader. “Given the DOL's unwillingness to defend ERISA preemption, it will be up to plan sponsors to challenge any state fiduciary rules that attempt to infringe on DOL's role,” wrote another. “Else, plan sponsors may find that they have to comply with conflicting rules from the DOL and the states (and perhaps a third interpretation from the SEC, and a fourth from the courts).”

“Some states will be fine with the SEC and DOL rules,” explained one reader.  “Others will insist that their own residents need additional protection. Unless the SEC and/or DOL preempts the field, we will be left with a patchwork.”

“The DOL should preempt any state law regarding fiduciary issues for ERISA plans, except possibly for IRAs,” commented another.

Other Comments

“One result is almost certain: the final Reg BI and accompanying DOL rule will be challenged in court. Regrettably, we have gone from notice-and-comment rulemaking to notice-and-comment-then-litigate rulemaking.”

“I'm suffering from fiduciary rule overload at this point...”

“It will probably be a watered down version of the previous one.”

“How about drawing the line so that it includes any action related to assets in an employer-sponsored, tax-qualified plan, and excludes any action related to assets that are not in an employer-sponsored, tax-qualified plans,” commented one reader. “In = investment allocations of 401(k) assets, recommendations to take distributions of 401(k) assets, etc. Out = IRA monies and HSA monies, where the participant should be her own fiduciary (or retain one as needed).”

“Since they're coordinating with the SEC, it will be a companion to the final Reg BI/SEC rule. As a result, I don't expect it to be as far reaching as the original proposal.”

“The old fiduciary rule pitted two of my least favorite entities against each other: intrusive government vs. overpaid investment advisors. It was hard for me to decide who should win. I was hoping they'd cancel each other out.”

Thanks to everyone who participated in our weekly NAPA Net Reader Poll!