As Donald Trump was officially sworn in as the 45^th President, he was without a sitting Labor Secretary.

Outgoing Secretary Thomas Perez is being considered to chair the Democratic National Committee, a role that would put him at the top of his party’s stratosphere.

At a recent forum featuring candidates to lead the DNC, Perez said Democrats need to hit Trump “between the eyes with a two-by-four and treat him the way (Sen.) Mitch McConnell treated Barack Obama.”

As Labor Secretary, Perez struck a much more diplomatic tone advancing the agency’s aggressive agenda under the Obama administration.

Asst. Sec. of Labor Phyllis Borzi (Photo: AP)

By one measure, Perez’s potential ascendance to the head of the Democratic Party is testament to his success leading a Labor Department that may ultimately be regarded as the most active in modern time.

As far as the country’s retirement landscape is concerned, there is little debate as to the historical influence of Perez and Assistant Sec. Phyllis Borzi (pictured) head of the Employee Benefits Security Administration and the chief architect of the fiduciary rule.

No matter the fate of the rule under the Trump administration—the incoming Labor Secretary will have the power to delay the rule’s April 10^th implementation date—Perez and Borzi’s impact on the retirement industry and investors is a fait accompli, says Barbara Roper, director of investor protection at the Consumer Federation of America.

A "lasting" legacy

Barbara Roper, Consumer Federation of America

“They can rest assured that they have left a lasting legacy behind them that will improve the retirement security of millions of Americans,” said the CFA's Barbara Roper (pictured), a lead advocate for the regulation throughout the long rulemaking process.

That it was the Labor Department, and not the Securities and Exchange Commission, that delivered what Roper calls “the most significant improvement in investor protections in a generation,” underscores the historical influence of the outgoing leadership at Labor.

While the Trump administration has given little indication of their intentions for the rule, the consensus among stakeholders is that a delay is likely.

If that is the case, retirement investors will still come out ahead, says Roper.

“Although industry’s attacks on the rule have been reenergized since the November election, many of these benefits will persist regardless of the rule’s ultimate fate,” she said.

“Even before the formal implementation date, the rule is revolutionizing the way retirement advice is offered, particularly through commission-based accounts,” added Roper, citing the recent proliferation of new, lower cost share classes of mutual funds throughout the industry.

“Each day we hear a new announcement of how financial firms are implementing the rule in ways that preserve access to commission-based advice while eliminating the most toxic conflicts associated with advice, just as DOL intended,” said Roper. Opponents of the rule have long argued its Best Interest Contract Exemption effectively prohibits commission-based sales of investments.

“All of these developments are directly attributable to the rule’s requirement that firms eliminate practices that encourage and reward advice that is not in customers’ best interests,” she added.

A “destructive” legacy

John Berlau, Competitive Enterprise Institute

For opponents of the rule, the jury is still out on Labor and the EBSA’s legacy under the Obama administration.

“If the rule goes through, then Labor’s legacy will clearly be a very destructive one,” said John Berlau (pictured), a senior fellow at the Competitive Enterprise Institute, a think tank that advocates for free market economic principals.

CEI and Berlau have recommended the Trump administration delay the fiduciary rule indefinitely until it can be repealed, and says the issue needs to be a top economic policy initiative in the next administration.

“By the government’s own estimates, the rule is the most expensive regulation of 2016,” said Berlau. “The Labor Department flat out rejected the approach of requiring more disclosures that would differentiate brokers from fiduciary advisors. The rule has already caused unnecessary disruption and is limiting options in retirement investing. It will make financial guidance more expensive.”

Among the legal challenges to the rule is the question of whether the Labor Department acted outside its statutory authority by creating new private right of action that gives retirement investors the ability to sue providers under class actions.

Asst. Sec Borzi has said that provision of the rule is needed for enforcement. Several sources have told BenefitsPro that the power the rule gives to the plaintiffs’ bar is among Republican lawmakers’ primary concerns.

“The private right of action proves how outrageous and unworkable this rule is,” said Berlau. “You are going to get thousands of different decisions by different courts. People won’t know what a best interest investment standard is—it will be in the eyes of the beholder.”

Stripping the private right of action from the rule would only succeed in making it “less bad,” says Berlau.

Congressional Republicans remain committed to blocking the rule. That they went to the extent of passing a resolution to block it under the Congressional Review Act last year is proof of that, says Berlau.

“They don’t go that far for every piece of regulation—I think there were only four or five votes under the CRA last year.”

If the Labor Department under the Trump administration does not move to delay the rule before its April 10^th implementation date, Berlau expects Republicans to take matters into their own hand via the budget reconciliation process.

“But it won’t be without a fight,” said Berlau.

Instant Insights /

No matter its fate, fiduciary rule will define Labor, EBSA legacy

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