Bipartisan Lawmakers Move to Overturn Biden Admin’s New Investment Planning Rule

The U.S. Department of Labor Building in Washington on March 26, 2020. Alex Edelman/AFP via Getty Images

A bipartisan group of lawmakers is advancing a proposal to reverse a new Biden administration rule regulating who can give retirement investment advice.

On April 23, the Department of Labor (DOL) announced the finalization of a new rule, titled “Retirement Security Rule: Definition of an Investment Advice Fiduciary,” updating the definition of a fiduciary under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. The Biden administration described the new rule as a way to protect investors, with acting Labor Secretary Julie Su stating, “This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest.”

Under the new rule, the DOL said fiduciaries must “adhere to high standards of care and loyalty” and avoid making recommendations “that favor the investment advice providers’ interests—financial or otherwise—at the retirement savers’ expense.”

While the Biden administration has said the new rule will protect investors, critics have said it would constrain investment advisors and leave consumers with fewer investment options. Several of those critics have now introduced a Senate joint resolution to reverse the rule.

“The Biden administration is imposing burdensome regulations that restrict investing opportunities, especially for lower-and middle-income Americans. Americans should be encouraged to save by, among other things, minimizing hassle. This is whether they are saving for retirement, a child’s education, or for the unexpected life event” Sen. Bill Cassidy (R-La.) said in a Wednesday press statement.

The resolution, utilizing a provision within the existing Congressional Review Act (CRA), states Congress disapproves of the new DOL rule governing investment advisors, and states this rule “shall have no force or effect.”

“This CRA stops the Biden administration from making it harder for Americans to invest in their future,” said Mr. Cassidy, the ranking member of the Senate Health, Education, Labor, and Pensions Committee and a co-sponsor of the bill.

The resolution is backed by Republican lawmakers in the Senate and House of Representatives, including Sen. Joe Manchin (D-W.Va.).

Manchin Says Rule Threatens Financial Tools Consumers Favor

In a Wednesday press statement, Mr. Manchin argued that the new DOL rule threatens a range of financial tools favored by consumers, including basic financial education and investment planning courses, along with life insurance, annuity plans, and other financial instruments.

“This Department of Labor rule is yet another example of dangerous federal overreach. While I understand the Administration’s intent to protect Americans’ retirement savings, the truth of the matter is this does the exact opposite,” Mr. Manchin said. “If allowed to go into effect, the rule has the potential to cause many West Virginians to actually lose access to investment advice due to how broadly the rule defines fiduciary.”

Appeals Court Struck Down Previous DOL Rule

Rep. Virginia Foxx (R-N.C.), who chairs the House Education and Workforce Committee, said the new DOL rule is a “carbon copy” of another rule that “was shot down by the 5th U.S. Circuit Court of Appeals.” In 2016, under President Barack Obama, the DOL implemented a new rule to redefine the term “investment advice fiduciary” in the ERISA. Several financial services providers and the U.S. Chamber of Commerce eventually sued to overturn that 2016 rule, and the 5th Circuit Court of Appeals ultimately vacated the rule in a March 2018 decision.

Joining the push to upend this latest DOL rule are Sens. Ted Budd (R-N.C.), Roger Marshall (R-Kansas), Kevin Cramer (R-N.D.), John Barrasso (R-Wy.), Chuck Grassley (R-Iowa), Steve Daines (R-Mont.), Joni Ernst (R-Iowa), Bill Hagerty (R-Tenn.), Jim Risch (R-Idaho), Roger Wicker (R-Miss.), Mike Crapo (R-Idaho), James Lankford (R-Okla.), Marsha Blackburn (R-Tenn.), and Mike Braun (R-Ind.)

Rep. Rick Allen (R-Ga.) is sponsoring a companion version of the Senate bill on the House side, with support from Ms. Foxx.

NTD News reached out to the DOL for comment about the new rule and the efforts to overturn it but the department did not respond by press time.

Fetterman Cheers DOL Rule

Sen. John Fetterman (D-Pa.) was one of the proponents for the new DOL rule. He and Sens. Brian Schatz (D-Hawaii), Cory Booker (D-N.J.), Elizabeth Warren (D-Mass), Peter Welch (D-Vt.), Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), Ed Markey (D-Mass), and Laphonza Butler (D-Calif.) penned a letter to the DOL in March, urging the department to move ahead with the new regulations.

Mr. Fetterman again cheered on the DOL as it finalized the rule on April 23.

“In every corner of the economy, the Biden administration is fighting for working families. From cracking down on junk fees to making sure working Americans get the most out of their money—even when it pisses off the financial industry and their lobbyists. This new rule is the latest example of that,” the Pennsylvania Democrat said in an April 23 press statement.

Mr. Fetterman argued that until recently, financial advisors could give financial advice “that padded their own commissions, even if they knew it would yield worse returns for the saver.”

“That’s just wrong and—thanks to this new rule—it’s now against the law,” Mr. Fetterman continued.

“It’s wrong for insurance companies to pay financial advisors to deliberately give bad advice — with kickbacks like fancy cars & vacations,” Ms. Warren also wrote in an April 23 post on X, formerly Twitter, celebrating the DOL rule. “This Biden admin rule requires advisors to do right by clients, ending conflicts of interest that put families’ retirement savings at risk.”

From NTD News