National Regulatory Update: Independent Contractor Rule and Fiduciary Rule

As we enter the fall, the Department of Labor has made progress on two significant rulemakings impacting our industry: its final independent contractor rule and a new fiduciary rule proposal. Both have gone to the Office of Management and Budget (OMB) for review. While that process doesn’t have a pre-determined length of time, it typically takes around 60-90 days.

Independent Contractor Rule

The Department sent the final independent contractor rule to OMB in late September. This issue is a big priority for the Biden administration, and with an election looming next year, expect a final version to be unveiled sooner rather than later.  

Last year, we wrote a comment letter outlining the proposal’s significant flaws, including that it was based on a misapplication of existing case law. At this point, the details of the final proposal are unclear, but when the rule is published, we don’t anticipate many significant changes, meaning that our members will not get the clarity they need – and deserve – on this issue. 

If that ends up being the case, we will utilize all advocacy avenues available to us, which could include pursuing a legal challenge against the DOL. We have taken the Department to court before and prevailed. If necessary, we will do so again to defend our members’ businesses and preserve Main Street Americans’ access to financial advice, products and services.

Fiduciary Rule Proposal…Again

Meanwhile, the DOL sent a new version of a proposed fiduciary rule, renamed its Retirement Security rule, to the OMB in early September. Following its review, the comment period will begin, allowing the public to see what’s in the proposed rule for the first time.

Once it gets released, we will analyze it closely to determine its impact on our industry. Rest assured, our team will be prepared to act on behalf of our members.

Lawmakers Speak Out

U.S. Senator Bill Cassidy and Representative Virginia Foxx recently issued a press release urging the DOL to “cease any further action to amend the definition of an investment advice fiduciary.” Sen. Cassidy is the ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, while Rep. Foxx is chairwoman of the House Education and the Workforce Committee.

While those committees have oversight jurisdiction of the Labor Department and Sen. Cassidy’s and Rep. Foxx’s statements are helpful, the reality is that stopping the DOL’s proposal via Congress requires bipartisan agreement on the issue.

The press release also noted that the Department has embraced at least three positions on this issue in the last two years, which “has caused serious damage for American savers.” Additionally, it pointed out that a past – and unsuccessful – attempt to promulgate a similar rule should serve as a “cautionary tale” to the DOL. 

At the beginning of the year, we would have expected the DOL to have been further along in promulgating both of these rules. However, no one should misinterpret the slow movement by the DOL: It’s only a matter of time until both are published. And when that time comes, we will do everything we can to defend you, your business and your clients.