New legislation introduced in the U.S. House of Representativeswould remove the regulation of IRAs from the Department of Labor’sjurisdiction.

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It would also create a more flexible best interest standard foradvisors to IRAs and small businesses than the one proposed inthe DOL’s fiduciary rule.

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The Retirement Choice Protection Act of 2015, co-sponsored byRep. Mike Kelly, R-Pennsylvania, and Rep.Sam Johnson, R-Texas, would transfer oversight ofIRAs, annuities, Simplified Employee Pensions (SEPs), and SimpleIRA accounts to the Secretary of Treasury, according to language inthe bill.

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Were it to pass, it would effectively neuter the DOL’s capacityto finalize its proposed fiduciary rule,which the agency says is necessary to assure that retirees are notsubjected to conflicted advice when they roll 401(k) retirementassets over to IRAs.

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Recently, legislation that would require the Securities andExchange Commission to be the lead regulatory body in drafting anew best interest standard passed the House.

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It too would neuter the DOL’s ability to finalize itsproposal.

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The White House swiftly vowed to veto it.

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Some estimates claim as much as $2 trillion in assets will rollout of workplace plans and into IRAs in the next five years.

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The DOL proposal’s Best Interest Contract Exemption would insistextensive disclosure requirements on advisors and brokers thatrecommend compensation-based investments to IRA accountholders.

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Opponents of the DOL say the BICE provisions would effectivelyoutlaw commission-based compensation.

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The proposal would also prohibit RIAs from charging higher feeson rolled over assets than participants were charged in 401(k)plans.

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The question of the DOL’s authority to regulate IRAs had beenraised by other politicians and in other proposed legislation.

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Last year, Sen. Orrin Hatch, R-Utah, introduced the SAFE Act, whichin part attempted to set straight the question of the DOL’sauthority to regulate IRAs by shifting all oversight authority toTreasury, similar to the new proposed legislation from Rep. Kellyand Rep. Johnson.

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Hatch’s bill was first introduced in 2013 and never made it outof the Senate Finance Committee. He has made repeated statements asto his intention to reintroduce the legislation since, mostrecently this past May.

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In 2008 testimony before Congress, Brad Campbell, then the assistantSecretary of Labor and head of the Employee Benefits SecurityAdministration, said the DOL “generally does not have jurisdictionover IRAs except to the extent they are employer-sponsored.”

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But Campbell, now in private practice as a partner in the lawfirm Drinker, Biddle and Reath, also gave a more nuanced assessmentof the DOL’s authority over IRAs in the same 2008 testimony.

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The Internal Revenue Service is largely responsible for IRAoversight, and can revoke tax-favored treatment if the ownerengages in a prohibited transaction that involves “self-dealing,”said Campbell.

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But the DOL does have authority with respect to defining justwhat a prohibited transaction is.

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Campbell also testified that the DOL “has sole jurisdiction overthe granting of prohibited transaction exemptions for allIRAs.”

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It is that authority legislation like Sen. Hatch’s, and thelatest from Rep. Kelly and Rep. Johnson, are attempting torevoke.

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Language in The Retirement Choice Protection Act of 2015 saysTreasury, in consultation with the Securities and ExchangeCommission, will have the power to prescribe regulations, rulings,opinions and “exemptions” relative to a the standard of carebrokers and advisors owe IRA and annuity owners.

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The 40-page proposed legislation extensively defines analternative best interest standard alternative to the one definedin the DOL’s proposal.

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Any recommendation provided with the “care, skill, prudence anddiligence” that a prudent person would exercise would meet thatstandard, according to language in the proposal.

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The recommendation of proprietary investments would be allowedunder the bill’s best interest standard.

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While the law would require disclosure of compensation,commission-based and indirect compensation from a product providerwould not constitute a prohibited transaction, as they do in theDOL’s proposal.

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“By adding a workable best interest standard to thisill-conceived rule, we will ensure that American families cancontinue to receive affordable investment guidance for a secureretirement while making it easier for small businesses to provideretirement benefits to their employees,” said Rep. Kelly in astatement.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.