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Don’t Read Too Much Into Obama Ignoring DOL Fiduciary in State of the Union Address

January 15, 2016

Obama: American workers should carry retirement savings to wherever career path leads

Jan 13, 2016 @ 1:17 pm | By Mark Schoeff Jr. | Investment News

President Barack Obama told the nation on Tuesday night that he wants American workers to carry their retirement savings with them wherever their career path leads. But he didn’t mention what should happen if they take their savings to a financial adviser.

Like many people working in or writing about the investment advice business, I was anticipating that Mr. Obama would use his last State of the Union message to highlight a Labor Department rule that would raise advice standards for retirement accounts.

A mention from Mr. Obama, its highest-profile supporter, would have given added momentum to the measure, which was introduced last April and survived an attempt by lawmakers to stop it in therecent omnibus spending bill.

At one point, it seemed as if he was on the verge of invoking the DOL rule. In talking about improving “economic security,” he mentioned retraining and wage insurance and retirement plan portability.

“Even if he’s going from job to job, he should still be able to save for retirement and take his savings with him,” Mr. Obama said in the address to Congress. “That’s the way we make the new economy work better for everybody.”

He didn’t take the discussion any further than that. In fact, he only mentioned retirement a handful of times.

Even though Mr. Obama ignored the DOL fiduciary rule, that doesn’t mean it’s in trouble.

The address was designed to be a legacy-building exercise for the president. For the most part, he kept it at the 35,000-foot level, rather than getting entangled in the weeds of regulations and legislation. One of his few explicit mentions of regulation was bipartisan-applause-worthy about cutting outdated regulations.

If he’s going to carve out precious space for a topic in the State of the Union address, the president probably wants it to generate at least some positive reaction. There has been enough concern expressed on both sides of the aisle in Congress about the DOL rule that a mention of it would get a tepid reply at best. There could have been a bipartisan sitting on hands.

More importantly, Mr. Obama is winning the battle over the DOL rule. It is a regulation being promulgated by an executive agency. Congress can’t stop him, despite the introduction of legislation late last year to do so. Why would Mr. Obama gloat about the rule in front lawmakers?

TEA LEAVES

If you’re reading tea leaves about the rule, there are more prosaic and effective ways than monitoring the State of the Union speech. Watch the Office of Management and Budget’s regulatory dashboard, which provides a list of rules that are under review. When it receives the final DOL rule, it must post a public notice on this site. And don’t worry, you’ll hear about it from me.

Once the rule gets to OMB, the agency likely will take several weeks to assess it, even under an expedited process. The final rule will then be publicly released, probably in early spring.

At that point, Congress will have 60 legislative days to review it. But congressional rejection of a regulation is rare. After the review period, the rule would become effective — likely comfortably before the end of the Obama administration.

Of course, with a regulation this controversial, surprises may occur — and an industry lawsuit is a near certainty. That means the administration will stay engaged … though sometimes quietly.

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Loreen M. Gilbert, CIMA, AIF, CRC, CLTC – President, WealthWise Financial Services
Blue Vault
July 6, 2016

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