House Ed & Workforce Hearing with Perez
House Education and the Workforce Committee
“Examining the Policies and Priorities of the U.S. Department of Labor”
Wednesday, March 16, 2016
Key Topics & Takeaways
- Fiduciary Rule Release: When Rep. Scott asked Secretary Perez for an update as to when the conflict of interest rule will be released, Perez answered that it will be in the “near future” once the Office of Management and Budget (OMB) completes its review.
- Cost to Investors: Rep. Roe noted the Morningstar report that estimated the proposed fiduciary rule will cost investors $2.4 billion annually and sends a “chunk of business” to robo advisors if account values are not high enough.
- Small Accounts: Rep. Salmon noted that he had never received more “outcries” from constituents than he has over the fiduciary rule and said he wants to ensure the rule does not make financial advice too expensive for small savers. Perez replied that there is a shared interest in ensuring everyone has access to advice and that he will explain how the DOL intends to proceed once the final rule is released.
- Variable Annuities: Rep. Bishop asked if the DOL is making modifications to the best interest contract (BIC) exemption to create a “clear and workable path” for variable annuities. Perez noted the comments received on the issue and that when the final rule is released, he will explain the changes made, adding that the DOL is “working on” the issue.
Speakers
- The Honorable Thomas E. Perez, Secretary, U.S. Department of Labor
Opening Statements
In his opening statement, Chairman John Kline (R-Minn.) said that the economy will not get where it should be if the Department of Labor (DOL) continues to push an “extreme” regulatory agenda. He continued that there has been broad bipartisan agreement concerning policies governing retirement advice and how the proposed fiduciary rule will mean less access to advice for low and middle income families, as well as small businesses. Kline applauded Rep. Phil Roe’s (R-Tenn.) alternative to the proposed fiduciary rule, adding that the DOL’s “my way or the highway” approach to policies will not help the economy grow.
In his opening statement, Ranking Member Bobby Scott (D-Va.) commented that inequality is a major factor inhibiting economic growth and questioned whether current policies will help strengthen the top one percent or working families. He continued that long overdue “concrete” steps must be taken to move the economy in the right direction, to include raising the minimum wage, protecting retirees and retirement savings, and adjusting the overtime threshold and paid sick leave.
Testimony
The Honorable Thomas E. Perez, Secretary, U.S. Department of Labor
In his testimony, Secretary Perez stressed the importance of apprenticeships, increased minimum wage and overtime pay, and noted that the Occupational Safety and Health Administration (OSHA) is close to finalizing a rule protecting coal miners. He continued that the DOL’s Employee Benefit Security Administration (EBSA) is working to empower workers upon retirement through the conflict of interest rule that puts a client’s best interest first when financial advisors give advice, adding that they continue to work on the rule until its final release.
Question & Answer
Pension System
Kline stressed that further work is needed to protect pensions and suggested composite plans as a new option, then asked Perez for his commitment to work with the Committee to finish pension reform this year. Perez noted that the multi-employer pension system is “in the red” with “tough decisions to be made,” and agreed to continue dialogue around a “big table.”
Projected Fiduciary Rule Release
When Scott asked Perez for an update as to when the conflict of interest rule will be released, Perez answered that it will be in the “near future” once the Office of Management and Budget (OMB) completes its review.
SAVERS Act
Scott asked if H.R. 4294, the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act that Roe co-sponsored, is a sufficient alternative to the DOL’s proposal. Perez replied that the SAVERS Act “moves the status quo backwards” while “we need to move forward.”
Roe questioned why the DOL opposes the SAVERS Act and asked for him to reconsider. He continued that the DOL’s rule makes it more difficult for families to save for retirement, which is why his alternative legislation was created, and noted the Morningstar report that estimated the proposed rule will cost investors $2.4 billion annually and sends a “chunk of business” to robo advisors if account values are not high enough. Roe then stated that a study on the United Kingdom’s Retail Distribution Review (RDR) showed that such a rule makes it more difficult for savers to invest. Perez did not reply to his statements but added that the DOL listened to the concerns raised by stakeholders and that once the final rule is released he is committed to explaining the changes that were made.
Small Accounts
Rep. Matt Salmon (R-Ariz.) noted that he had never received more “outcries” from constituents than he has over the fiduciary rule and said he wants to ensure the rule does not make financial advice too expensive for small savers. Perez replied that there is a shared interest in ensuring everyone has access to advice and that he will explain how the DOL intends to proceed once the final rule is released.
Variable Annuities
Rep. Mike Bishop (R-Mich.) stated that the fiduciary rule has caused “great consternation” on a daily basis and that he has received comments that variable annuity products should remain a prohibited transaction exemption. He asked if the DOL is making modifications to the best interest contract (BIC) exemption to create a “clear and workable path” for variable annuities. Perez noted the comments received on the issue and that when the final rule is released, he will explain the changes made, adding that the DOL is “working on” the issue.
ESOPs
Rep. Brett Guthrie (R-Ky.) discussed a recent meeting with the United Mine Workers where they discussed the coal industry’s problem with pension funds. He continued that employee stock ownership plans (ESOPs) could create wealth for such workers and noted his concern that the DOL has issued subpoenas on ESOPs prior to notification that an investigation was underway, and asked Perez to review the process going forward. Perez replied that he is unfamiliar with ESOP subpoenas but that he is interested in “getting around the table and listening to everyone.”
For more information on this hearing, please click here.
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House Education and the Workforce Committee
“Examining the Policies and Priorities of the U.S. Department of Labor”
Wednesday, March 16, 2016
Key Topics & Takeaways
- Fiduciary Rule Release: When Rep. Scott asked Secretary Perez for an update as to when the conflict of interest rule will be released, Perez answered that it will be in the “near future” once the Office of Management and Budget (OMB) completes its review.
- Cost to Investors: Rep. Roe noted the Morningstar report that estimated the proposed fiduciary rule will cost investors $2.4 billion annually and sends a “chunk of business” to robo advisors if account values are not high enough.
- Small Accounts: Rep. Salmon noted that he had never received more “outcries” from constituents than he has over the fiduciary rule and said he wants to ensure the rule does not make financial advice too expensive for small savers. Perez replied that there is a shared interest in ensuring everyone has access to advice and that he will explain how the DOL intends to proceed once the final rule is released.
- Variable Annuities: Rep. Bishop asked if the DOL is making modifications to the best interest contract (BIC) exemption to create a “clear and workable path” for variable annuities. Perez noted the comments received on the issue and that when the final rule is released, he will explain the changes made, adding that the DOL is “working on” the issue.
Speakers
- The Honorable Thomas E. Perez, Secretary, U.S. Department of Labor
Opening Statements
In his opening statement, Chairman John Kline (R-Minn.) said that the economy will not get where it should be if the Department of Labor (DOL) continues to push an “extreme” regulatory agenda. He continued that there has been broad bipartisan agreement concerning policies governing retirement advice and how the proposed fiduciary rule will mean less access to advice for low and middle income families, as well as small businesses. Kline applauded Rep. Phil Roe’s (R-Tenn.) alternative to the proposed fiduciary rule, adding that the DOL’s “my way or the highway” approach to policies will not help the economy grow.
In his opening statement, Ranking Member Bobby Scott (D-Va.) commented that inequality is a major factor inhibiting economic growth and questioned whether current policies will help strengthen the top one percent or working families. He continued that long overdue “concrete” steps must be taken to move the economy in the right direction, to include raising the minimum wage, protecting retirees and retirement savings, and adjusting the overtime threshold and paid sick leave.
Testimony
The Honorable Thomas E. Perez, Secretary, U.S. Department of Labor
In his testimony, Secretary Perez stressed the importance of apprenticeships, increased minimum wage and overtime pay, and noted that the Occupational Safety and Health Administration (OSHA) is close to finalizing a rule protecting coal miners. He continued that the DOL’s Employee Benefit Security Administration (EBSA) is working to empower workers upon retirement through the conflict of interest rule that puts a client’s best interest first when financial advisors give advice, adding that they continue to work on the rule until its final release.
Question & Answer
Pension System
Kline stressed that further work is needed to protect pensions and suggested composite plans as a new option, then asked Perez for his commitment to work with the Committee to finish pension reform this year. Perez noted that the multi-employer pension system is “in the red” with “tough decisions to be made,” and agreed to continue dialogue around a “big table.”
Projected Fiduciary Rule Release
When Scott asked Perez for an update as to when the conflict of interest rule will be released, Perez answered that it will be in the “near future” once the Office of Management and Budget (OMB) completes its review.
SAVERS Act
Scott asked if H.R. 4294, the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act that Roe co-sponsored, is a sufficient alternative to the DOL’s proposal. Perez replied that the SAVERS Act “moves the status quo backwards” while “we need to move forward.”
Roe questioned why the DOL opposes the SAVERS Act and asked for him to reconsider. He continued that the DOL’s rule makes it more difficult for families to save for retirement, which is why his alternative legislation was created, and noted the Morningstar report that estimated the proposed rule will cost investors $2.4 billion annually and sends a “chunk of business” to robo advisors if account values are not high enough. Roe then stated that a study on the United Kingdom’s Retail Distribution Review (RDR) showed that such a rule makes it more difficult for savers to invest. Perez did not reply to his statements but added that the DOL listened to the concerns raised by stakeholders and that once the final rule is released he is committed to explaining the changes that were made.
Small Accounts
Rep. Matt Salmon (R-Ariz.) noted that he had never received more “outcries” from constituents than he has over the fiduciary rule and said he wants to ensure the rule does not make financial advice too expensive for small savers. Perez replied that there is a shared interest in ensuring everyone has access to advice and that he will explain how the DOL intends to proceed once the final rule is released.
Variable Annuities
Rep. Mike Bishop (R-Mich.) stated that the fiduciary rule has caused “great consternation” on a daily basis and that he has received comments that variable annuity products should remain a prohibited transaction exemption. He asked if the DOL is making modifications to the best interest contract (BIC) exemption to create a “clear and workable path” for variable annuities. Perez noted the comments received on the issue and that when the final rule is released, he will explain the changes made, adding that the DOL is “working on” the issue.
ESOPs
Rep. Brett Guthrie (R-Ky.) discussed a recent meeting with the United Mine Workers where they discussed the coal industry’s problem with pension funds. He continued that employee stock ownership plans (ESOPs) could create wealth for such workers and noted his concern that the DOL has issued subpoenas on ESOPs prior to notification that an investigation was underway, and asked Perez to review the process going forward. Perez replied that he is unfamiliar with ESOP subpoenas but that he is interested in “getting around the table and listening to everyone.”
For more information on this hearing, please click here.