The Labor Department has killed a Bush administration rule that would have cleared the way for mutual fund companies to offer direct one-on-one investment advice through their affiliates to defined-contribution plan participants.
“The department decided to withdraw the [Bush] rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule and the class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries,” the department’s Employee Benefits Security Administration announced Thursday, November 19.
The EBSA also said it planned to issue a new proposed regulation on investment advice.
Gloria Della, an EBSA spokeswoman, said it was unclear when the agency would publish a new proposal or adopt a new final regulation.
“We don’t have a specific timeline set because it’s going through the regulatory process,” Della said.
The EBSA under the Obama administration is expected to create a more conservative investment advice regulation that ERISA attorneys said would focus more on the interests of plan participants than the Bush regulation would have. But exactly what the DOL has in mind remains a mystery.
“We’re really in limbo until we get the new proposal,” said Jason Bortz, an ERISA attorney with the law firm Davis & Harman.
The EBSA announced on Monday, November 16, that it had postponed the effective date of the Bush administration investment advice proposal until May 17, 2010—the third such postponement since President Barack Obama took office.
Robert Doyle, director of the EBSA’s office of regulations and interpretations, said the agency has extended the effective date because the cancellation of the rule won’t technically go into effect until 60 days after publication in the Federal Register.
Bradford Campbell, who headed the EBSA when the Bush rule was developed, said in a statement: “The decision to withdraw these regulations in their entirety is a significant loss to the millions of workers who have waited over three years for the department to provide access to quality, professional investment advice.”
“This will deny workers advice they were promised in 2006 until well into 2010,” Campbell, now an attorney at the law firm Schiff Hardin, said in an interview.