The Department of Labor has sent its proposed fiduciary rule to the Officeof Management and Budget for review. Here's where we're going andwhere we've been with the proposed rule.

Amendments to the proposal published last year have likely beenmade, based on the thousands of comments from stakeholdersgenerated from two comment periods and four days of open publichearings last August.

OMB must review rule - 60 to 90 days

But those amendments won’t be made public until the OMB finishesits review of the rule.

Typically, that process takes 60 and 90 days, depending on themagnitude of the proposed regulation.

Review period by lawmakers - 60 days

Upon completion of the review, the Congressional Review Actrequires a 60-day review period by lawmakers before a regulationcan be officially finalized.

Any legislative effort to derail the rule’s finalization willhave to survive a veto from the White House.

Next Tuesday, the U.S. House of Representatives Education andWorkforce Committee will hold a mark-up of two companion,bipartisan pieces of legislation crafted as alternatives to theDOL’s rule.

Culmination of a more-than 5-year effort

The DOL’s proposal is the culmination of a more than five-yeareffort by the Obama Labor Department to address what it says areinherent conflicts of interest in the distribution of retirementproducts and advice to the IRA and defined contributionmarkets.

Read: The DOL Fiduciary Rule page

Shortly before the DOL’s proposal was first made public lastyear, the White House released a report from the President’sCouncil of Economic Advisors defending the necessity of addressingconflicts of interest in the financial services industry.

The report estimated that $1.7 trillion of IRA assets areinvested in commission-sold products that generate conflicts ofinterest.

That results in losses of $17 billion a year to investors, thereport claimed.

The DOL’s first attempt to propose a fiduciary rule in 2010 wascriticized for not providing a robust enough cost-benefit analysis.That proposal was ultimately withdrawn.

The second DOL attempt at a fiduciary rule

When it released its second proposal last year, the DOLincluded a detailed cost-benefit analysis of the regulation,estimating that complying with the new standard would cost industrybetween $2.4 billion and $5.7 billion over 10 years.

For however expensive that may be, the DOL said its proposal,which would hold most advisors to sponsors of 401(k) plans and alladvisors of IRAs to a fiduciary standard of care, would result in$44 billion in investor gains over 10 years.

“These gains alone would far exceed the proposal’s compliancecosts,” said the DOL in the proposal’s cost-benefit analysis.

Industry groups and sector analysts have called into questionthe accuracy of those estimates.

In a letter it sent during last year’s open comment period, theU.S. Chamber of Commerce called the DOL’s cost-benefit analysis“arbitrary” and “capricious.”

The cost of disclosure requirements under the proposal’s BestInterest Contract Exemption provision will cost industry 10 timesthe DOL’s estimates, said the Chamber’s comment letter.

New letter from the U.S. Chamber ofCommerce

Today, the Chamber sent a new letter to Shaun Donovan, thedirector of the OMB, raising concerns for what it says is “DOL’sfailure to properly assess the economic impact” of the proposal onsmall businesses.

Specifically, the DOL failed to allow the Small BusinessAdministration’s Office of Advocacy to provide a panel review ofchanges the DOL made to the rule before it was sent to OMB.

The Chamber is calling on DOL to share its final proposal withthe SBA advocates. In lieu of that, the Chamber is calling on OMBto conduct its own new independent economic analysis of theproposed rule’s impact on small businesses.

The DOL’s proposal includes a “seller’s carve out” that wouldexempt advisors to 401(k) plans with more than 100 participantsfrom complying with the rule’s disclosure requirements.

Assuming that provision has not been amended or withdrawn,advisors to plans with fewer than 100 participants would have tocomply with the proposals Best Interest Contract Exemption.

That will create increased costs and liabilities for small planadvisors that will be “grossly disproportionate to the benefits ofservicing small plans and low-balance accounts,” says theChamber.

Advisors will pass those costs onto small-business plansponsors, or simply stop servicing them altogether, the letteradded.

In passing increased costs on to employers, some small businesssponsors may be forced to reduce or eliminate matchingcontributions to savings accounts, putting them at a competitivedisadvantage with sponsors of large plans that will be better ableto attract talent with richer retirement benefits.

Some businesses can be expected to stop offering retirementplans as a consequence of the DOL’s rule, claims the Chamber.

The Chamber’s latest allegation that the DOL’s cost-benefitanalysis failed to consider the proposal’s financial impact onsmall businesses comes as The White House and Congress are working to advancelegislation that would increase small business employees’ access toworkplace retirement savings plans.

More than 5.5 million businesses in the country employ less than100 workers, and half of those businesses don’t offer retirementplans.

Lowballing costs

The Financial Services Institute, a trade organizationrepresenting the interests of independent broker dealers, alsoclaims the DOL lowballs the rule’s impact on industry in itscost-benefit analysis.

FSI says the rule will cost more than $3.9 billion in start upcosts, or more than 20 times the DOL estimate.

Analysts at Morningstar have said the DOL vastly underestimatesthe rule’s impact on industry.

About $3 trillion of client assets and $19 billion of revenue atwealth management firms will be impacted, according to oneMorningstar report.

Moreover, up to $600 billion of low-value IRA accounts can beexpected to be let go by full-service wealth management firms, ascompliance with the rule will make those accounts too costly tomaintain, says Morningstar.

Of the 25.8 million IRA counts examined by the Employee BenefitsResearch Institute, about 45 percent held less than $25,000 in2013.

In a more recent report, Morningstar analyst Stephen Ellis,director of financial services equity research at Morningstar,wrote that even the highest estimates of the rule’s cost onindustry are low, because they only focus on the cost ofimplementation.

Those high-end estimates put the rule’s cost at $1.1 billion toindustry, but Ellis thinks the cost will be closer to $2.4billion.

The question of DOL’s accuracy in estimating the cost of itsrule could lay the groundwork for legal challenges by the rule’sopponents.

In recent years, courts have blocked final implementation of twoSecurities and Exchange Commission regulations based on a failureto accurately establish the economic impact of rulemaking.

In 2012, new regulation on proxy access was blocked, and in 2010new regulation on fixed-income annuities was blocked, both by theDistrict of Columbia Circuit Court of Appeals.