Today, the U.S. Senate voted to pass S.J. Resolution 33, which would rescind the Department of Labor’s recently finalized fiduciary rule.

The resolution passed by a 56 to 41 margin, with three Democrats -- Sens. Donnelly, IN, Heitkamp, ND, and Tester, MT -- joining Republicans in support of blocking the DOL’s implementation of the rule, which will begin to phase in April of 2017.

The U.S. House of Representatives passed a similar resolution along party lines in April, just weeks after the rule was finalized.

Under the Congressional Review Act, Congress has 60 days to review finalized regulations. The resolution of disapproval of DOL’s rule will now go to President Obama, who has guaranteed a veto of the resolution. A two-thirds majority in both chambers will be necessary to override the veto.

Read: DOL fiduciary rule might affect advisor recruitment compensation

The Securities Industry and Financial Markets Association, which represents the interests of the broker-dealers whose commission revenues stand to be affected by the rule, urged lawmakers to support the rule in a letter.

As did the Chamber of Commerce, which sent a letter undersigned by a coalition of about 450 small businesses and financial service providers.

Read: SEC sets release date for its own fiduciary rule

The Chamber’s letter focused on the so-called seller’s carve-out, which was significantly amended in the final rule.

Under that provision, advisors and providers to 401(k) plans with less than $50 million in assets will be required to serve in a fiduciary capacity. Advisors to plans above that threshold will not be subject to the new rule.

In the proposed form of the rule, the seller’s carve-out applied to plans with less than $100 million in assets or fewer than 100 participants. By removing the 100 participant threshold in the final rule, DOL vastly expanded the number of plans and advisors that will be impacted by the rule.

Now, a hypothetical plan with 1,000 participants would be affected by the seller’s carve-out, assuming the average account balance is under $50,000.

The DOL has reasoned that larger plans will have the internal capabilities to prudently oversee plan design and implementation, and therefore will not need third-party advisors to act as fiduciaries.

The Chamber has taken exception to that reasoning throughout the rulemaking process.

In its most recent letter to lawmakers, the Chamber said the “additional burdens” to advisors of small plans means those advisors “will incur increased litigation risk and additional costs, which will be passed on the plan.”

Ultimately, “some advisors to small plans may decide to no longer offer their services to small plans if the expense and risk of changing business models and fee structures is not justified,” the letter added.

Instant Insights /

Senate passes resolution to block DOL fiduciary rule

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