Clock is Ticking on the Fiduciary Rule

The Department of Labor is in the last stages of finalizing its fiduciary rule (also called the conflict-of-interest rule), but the Republican-controlled Congress has not given up the fight.

They are almost certain to take steps to try to derail the rulemaking, and a recent post on Speaker of the House Paul Ryan’s blog declared that they are “determined to do everything possible to protect consumers and stop this rule.”

A CRA Challenge?

One likely avenue is for Congress to attempt to use the Congressional Review Act (CRA) to overturn the rule. The CRA provides a “fast track” procedure for overturning rules that significantly limit procedural roadblocks (e.g., the filibuster), allowing Congress to consider a rule with a simple majority vote.

CRA challenges are rarely successful because presidents almost always veto the action, and Congress has never mustered the two-thirds of each chamber necessary to override the veto. But it has been successful (once) when a Republican-controlled Congress passed a CRA challenge to a Clinton administration rule and President Bush declined to veto it.

It is, therefore, very important who is president if (or when) Congress passes a CRA challenge to the fiduciary rule. The CRA has very specific timing requirements, and it can only be used in a 60-day window after a rule is finalized. If Congress adjourns sine die (i.e., at the end of a Congress) before the 60-day period is up, the 60-day period restarts in the next Congress. This means that if the fiduciary rule is finalized too late, the CRA challenge could slip until the next Congress, giving the next president — potentially a Republican — control of the rule’s fate.

Timing Matters

The Obama administration is undoubtedly aware of the timing issues, and presumably, the CRA is something they are considering in deciding when to release the rule. However, determining the CRA “deadline” is not as easy as just counting calendar days. There are very specific rules that are keyed to the ever-shifting congressional calendar.

If each chamber of Congress meets as projected by the House and Senate Majority Leaders’ 2016 calendars, the CRA deadline would be May 16. However, 2016 is a presidential election year, and it is entirely possible that the calendar in either chamber could be materially shortened, which could move the CRA deadline up as early as March 22 if, for example, Congress does not hold a “lame duck” session or work on Fridays.

Secretary of Labor Thomas Perez was recently quoted as telling the Democratic caucus in the House that the fiduciary rule would be finalized in four to eight weeks. However, given CRA timing issues, it is very likely that — barring any hiccups — the rule will be out by late March or early April to give President Obama the best chance to defend the rule against the likely CRA challenge.

Michael P. Kreps is a principal at Groom Law Group, where he counsels employers, plan sponsors, financial institutions, trade associations and coalitions on retirement, health tax and employment matters. Previously, he served as the Senior Pensions and Employment Counsel for the U.S. Senate Committee on Health, Education, Labor, and Pensions from the 110th through the 114th Congresses.

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