US House Education and the Workforce Examines DOL FY2015 Budget Proposal
AT TODAY’S HOUSE EDUCATION AND THE WORKFORCE COMMITTEE HEARING, lawmakers discussed the President’s fiscal year 2015 budget proposal with Secretary of Labor Thomas Perez.
Chairman John Kline (R-Minn.) said in his opening statement that he hopes the committee will find areas where they can work together to grow the economy and expand opportunity for Americans. Ranking Member George Miller (D-Calif.) expressed concern with the increasing income inequality in America, and said access to overtime pay is an important issue.
In his testimony, Perez outlined the missions of the Department of Labor (DOL): 1) create more jobs; 2) help workers gain necessary skills; 3) ensure workplaces are free from discrimination; 4) ensure hard workers are rewarded; and 5) ensure workers can retire with dignity. He also noted the importance of overtime protections, saying salaried workers who are exempt from overtime protections are not receiving a “fair and appropriate wage.”
Regarding overtime pay under the Fair Labor Standards Act, Rep. Tom Petri (R-Wisc.) asked Perez which areas the DOL intends to review and what problems they intend to correct. Perez said that a worker should be paid more if they work more. He discussed the history of the overtime pay threshold, saying that in 1975 it was set at $250 a week, which, adjusted for inflation, would be about $970 today. He noted that the threshold today is set at $455 and the test to determine exemption could exempt someone who spends most of their time stocking shelves. Perez said the DOL will examine what the threshold should be and how the exemption should work.
Kline noted that there have been bipartisan concerns raised regarding the DOL’s efforts toward redefining fiduciary under the Employee Retirement Income Security Act (ERISA), saying that the original proposal would have reduced access to investment options. Kline asked if the expected re-proposal will address those bipartisan concerns. Perez said that he has had a number of discussions with Representatives and Senators, adding, “We’ll continue to listen and learn.”
Rep. Rush Holt (D-N.J.) asked Perez how he can ensure that setting higher standards on investment advice will not result in no advice and discourage saving. Perez said the DOL is looking “very carefully” at how to address conflicted advice, saying the two most important financial decisions an American faces are: 1) buying a house; and 2) investing for retirement.
Rep. Phil Roe (R-Tenn.) expressed concern with the U.K. rules banning commissions and the result of some banks “dropping out.” He asked if the DOL’s efforts to redefine fiduciary are a “solution searching for a problem.” Perez said there is no comparison to the U.K. rules because the DOL will not be banning commissions. He then said he strongly believes there is a problem, noting the history of “bad practices” in the mortgage industry. Roe responded that the mortgage industry is a different issue. He noted that fees and investment risks are currently fully disclosed and said he believes the DOL’s efforts are a “solution looking for a problem.”
Rep. Scott DesJarlais (R-Tenn.) asked Perez about the status of the DOL fiduciary regulation and said he is concerned about the impact on independent appraisers of employee stock ownership plans (ESOPs). Perez said there is “no precise timeframe,” saying, “we are very concerned about getting things right.” He added that he is a “huge fan” of ESOPs, but said a challenge arises when appraisals are “deliberately inflated,” likening it to the mortgage crisis. DesJarlais responded that workers would have a case in court if an appraisal were deliberately inflated. He noted that the fiduciary regulation as originally proposed would have raised the cost of appraisals.
Rep. Frederica Wilson (D-Fla.) expressed concern with the potential negative impact of the fiduciary rule on low-income workers’ access to advice and retirement planning. Perez said it is a goal that the revised rule will not negatively impact low-income workers and said the DOL will “work toward that.”
In his closing statement, Miller asked Perez to “continue to focus” on the retirement issue and said the questions around fees and costs are very important, saying “fees can eat up 30 percent” of an individual’s retirement savings. Kline also encouraged Perez to continue to look at the fiduciary rule, noting the bipartisan concerns raised regarding the timing, impact, and negative consequences on advice, particularly for low-income workers.
A number of Representatives asked questions relating to raising the minimum wage and extending unemployment insurance. Other questions addressed skills training and whistleblower protections.
More information and a webcast of the hearing can be found here.
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AT TODAY’S HOUSE EDUCATION AND THE WORKFORCE COMMITTEE HEARING, lawmakers discussed the President’s fiscal year 2015 budget proposal with Secretary of Labor Thomas Perez.
Chairman John Kline (R-Minn.) said in his opening statement that he hopes the committee will find areas where they can work together to grow the economy and expand opportunity for Americans. Ranking Member George Miller (D-Calif.) expressed concern with the increasing income inequality in America, and said access to overtime pay is an important issue.
In his testimony, Perez outlined the missions of the Department of Labor (DOL): 1) create more jobs; 2) help workers gain necessary skills; 3) ensure workplaces are free from discrimination; 4) ensure hard workers are rewarded; and 5) ensure workers can retire with dignity. He also noted the importance of overtime protections, saying salaried workers who are exempt from overtime protections are not receiving a “fair and appropriate wage.”
Regarding overtime pay under the Fair Labor Standards Act, Rep. Tom Petri (R-Wisc.) asked Perez which areas the DOL intends to review and what problems they intend to correct. Perez said that a worker should be paid more if they work more. He discussed the history of the overtime pay threshold, saying that in 1975 it was set at $250 a week, which, adjusted for inflation, would be about $970 today. He noted that the threshold today is set at $455 and the test to determine exemption could exempt someone who spends most of their time stocking shelves. Perez said the DOL will examine what the threshold should be and how the exemption should work.
Kline noted that there have been bipartisan concerns raised regarding the DOL’s efforts toward redefining fiduciary under the Employee Retirement Income Security Act (ERISA), saying that the original proposal would have reduced access to investment options. Kline asked if the expected re-proposal will address those bipartisan concerns. Perez said that he has had a number of discussions with Representatives and Senators, adding, “We’ll continue to listen and learn.”
Rep. Rush Holt (D-N.J.) asked Perez how he can ensure that setting higher standards on investment advice will not result in no advice and discourage saving. Perez said the DOL is looking “very carefully” at how to address conflicted advice, saying the two most important financial decisions an American faces are: 1) buying a house; and 2) investing for retirement.
Rep. Phil Roe (R-Tenn.) expressed concern with the U.K. rules banning commissions and the result of some banks “dropping out.” He asked if the DOL’s efforts to redefine fiduciary are a “solution searching for a problem.” Perez said there is no comparison to the U.K. rules because the DOL will not be banning commissions. He then said he strongly believes there is a problem, noting the history of “bad practices” in the mortgage industry. Roe responded that the mortgage industry is a different issue. He noted that fees and investment risks are currently fully disclosed and said he believes the DOL’s efforts are a “solution looking for a problem.”
Rep. Scott DesJarlais (R-Tenn.) asked Perez about the status of the DOL fiduciary regulation and said he is concerned about the impact on independent appraisers of employee stock ownership plans (ESOPs). Perez said there is “no precise timeframe,” saying, “we are very concerned about getting things right.” He added that he is a “huge fan” of ESOPs, but said a challenge arises when appraisals are “deliberately inflated,” likening it to the mortgage crisis. DesJarlais responded that workers would have a case in court if an appraisal were deliberately inflated. He noted that the fiduciary regulation as originally proposed would have raised the cost of appraisals.
Rep. Frederica Wilson (D-Fla.) expressed concern with the potential negative impact of the fiduciary rule on low-income workers’ access to advice and retirement planning. Perez said it is a goal that the revised rule will not negatively impact low-income workers and said the DOL will “work toward that.”
In his closing statement, Miller asked Perez to “continue to focus” on the retirement issue and said the questions around fees and costs are very important, saying “fees can eat up 30 percent” of an individual’s retirement savings. Kline also encouraged Perez to continue to look at the fiduciary rule, noting the bipartisan concerns raised regarding the timing, impact, and negative consequences on advice, particularly for low-income workers.
A number of Representatives asked questions relating to raising the minimum wage and extending unemployment insurance. Other questions addressed skills training and whistleblower protections.
More information and a webcast of the hearing can be found here.