Will the Department of Labor extend the comment period for its fiduciary regulation proposal?
One month ago, the Department of Labor ("DOL") proposed a new regulatory definition of a "fiduciary" with regard to any employee benefit plan covered by the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an Individual Retirement Account ("IRA"), by virtue of providing investment advice. The proposed regulation along with new prohibited transaction class exemptions and amendments to existing prohibited transaction class exemptions (the "Proposal") is monumental in terms of impact on the retirement plan industry, and was published by the DOL in a series of documents totaling close to 1,000 pages.
It comes as no surprise then that the DOL's 75-day written comment period (to be followed by hearings) that runs until July 6, 2015, has both pleased and displeased a significant number of constituencies. Both the United States Senate and House of Representatives have written to DOL Secretary Thomas Perez seeking an additional 45-day tail to be added on to the current 75-day comment period. Numerous financial organizations have also urged the DOL to extend the comment period, in a written letter submitted under the auspices of the Financial Services Roundtable. Interest groups organized under the banner of the "Save Our Retirement Coalition" argue with equal force that the proposed comment period of 75 days is sufficient time for analysis to be prepared and submitted. Secretary Perez has indicated thus far that he does not intend to grant an extension.
There are many lenses through which to assess this debate, but the argument may be best understood in two contexts. The sheer scope of the Proposal, in terms of complexity and length, is quite significant and probably represents the most significant undertaking with regard to pension regulatory amendment since the enactment of ERISA in 1974. In fact, the Proposal contains seven regulatory actions comprised of a proposed regulation, two new exemptions, and four proposed amendments to existent exemptions. The Proposal also identifies open questions and seeks input on well over one hundred items. Given the past DOL practice of allowing for longer comment periods on other (and arguably less complex) proposals, as well as the 104-day period granted on the now withdrawn original fiduciary regulatory proposal, there is an understandable concern about allowing for more time to prepare and respond to the DOL with thoughtful and insightful comments. Fiduciary advocates argue, very simply, that the current 75-day period is more than adequate, and that anything less results in a delay which is ultimately harmful to both retirement plans, participants, and IRA holders alike.
Furthermore, by definition, the more mysterious and less predictable aspect of this issue is the political landscape underscoring the debate. Key players include members of Congress, trade and advocacy groups, the White House, regulatory agencies such as the DOL and behind the scenes agencies with relevant interests such as the Securities and Exchange Commission.
To understand when and how the debate on the length of the comment period will resolve requires a clear understanding of the political stage on which it is held. It appears that the Proposal has some traction and may yet face some revisions, but the exact timeline is difficult to predict. We will continue to keep you updated on all aspects of this important issue.