Labour Department proposes delay of retirement savings rule

WASHINGTON: The Labour Department on Wednesday announced a proposal to push back the implementation of a controversial retirement savings rule by 60 days, giving officials more time to determine whether the rule should be revised or eliminated.

Without a delay, the fiduciary rule would take full effect April 10. But under the proposal, which will be officially published on Thursday, the rule would not take full effect until June 9.

The move comes after President Donald Trump signed a memo last month asking the department to re-evaluate the rule, which requires brokers working with retirement savers to put their clients’ interests ahead of their own. By delaying the rule, the Labour Department is buying more time to comply with the president’s request to look into whether the rule harms consumers by limiting their investment options.

The fiduciary rule, which aims to protect retirement savers from conflicts of interests, has been more than six years in the making. The Labour Department first introduced it in 2010 but the efforts have faced fierce resistance from industry groups and financial firms that argue it could raise legal costs for firms and leave savers with fewer choices.

After the rule was finalised last year, it faced multiple court challenges from business groups seeking, unsuccessfully, to block the regulation. At least three federal judges have ruled in support of the regulation.

The most recent decision upholding the rule came last month, a day before the Labour Department began the process of proposing a delay. That decision is now being appealed by the Chamber of Commerce and other business groups that oppose the regulation.

Consumer groups who support the rule are worried a delay could open the door for opponents to find ways to weaken or eliminate the rule. Advocates say the rule can help retirement savers by making it more difficult for brokers to recommend investments that are expensive or complicated.

“This proposal to delay the fiduciary rule is clearly part of the administration’s plan to undo it altogether,” said Lisa Donner, executive director of Americans for Financial Reform, a nonpartisan coalition of civil rights groups. Opponents of the rule argue it can have the unintended consequence of making it harder for some firms to work with savers who have small account balances, which are less profitable. They say that some brokers may decide to stop offering certain products that they fear would face more scrutiny under the rule, a shift that would leave some investors with fewer options. — WPBloomberg