A House of Representatives panel on Thursday advanced a resolution to block President Obama’s new rule cracking down on conflicts of interest in retirement planning, the latest in the Republican Party’s efforts to oppose the sweeping new regulation.
The House Education and the Workforce Committee voted Thursday to disapprove of the Labor Department’s rule under the Congressional Review Act. A rarely used tool of Congress, the Act allows the legislature to block a new administrative rule within 60 days of its finalization with a simple majority in both chambers.
House Majority leader Kevin McCarthy, speaking on the House floor later Thursday morning, said that the chamber would vote to pass the legislation next week.
Speaker Paul Ryan also took aim at the rule during his weekly press briefing, calling it “total Washington overkill.”
While it may generate publicity for the GOP campaign against Obama’s effort to reshape the financial planning industry, however, the disapproval resultion is not likely to stop the rule from going into effect as planned next April, because Obama could veto it. Congress likely lacks the votes to override a veto.
The rule, finalized earlier in April, would broaden the category of financial advisers and brokers who are legally required to act in their client’s best interests. Today, many brokers, insurers, and others in the industry are not held to that “fiduciary” standard.
Obama has said that the rule is necessary to prevent some brokers from “bilking” their clients by steering them toward inappropriate high-fee products for which they get kickbacks. The White House has argued that such conflicts of interests cost savers dearly.
At Thursday’s vote, committee chairman John Kline, R-Minn., warned that the rule will “encourage frivolous litigation and drive up costs for those who can least afford it.” He argued that it will prevent people with IRAs from getting retirement advice, and make it harder for small businesses to retain advisers for their workers.
Versions of the disapproval resolution have also been introduced in the committees on financial services and taxes. The rule applies to retirement accounts set up under the Employee Retirement Income Security Act, making it a Labor Department issue, but it also touches on the tax code and securities laws.
