U.S. Capitol building closeupLabor's fiduciary rule, which was finalized in 2016 after nearlysix years of effort, was vacated by a federal court last year.(Photo: Shutterstock)

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Two leading Democratic lawmakers on retirement issues are askingthe Government Accountability Office to investigate the impact ofthe Labor Department's fiduciary rule, which was vacated by the Fifth Circuit Court of Appeals ayear ago, on the financial services industry, retirement plansponsors, and retirement savers.

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Labor's rule, which was finalized in 2016 after nearly six yearsof effort, required a fiduciary standard of care on securities androllover recommendations for all qualified retirement planassets.

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A consortium of brokerage, insurance, andbusiness trade groups sued the Labor Department, alleging itoverstepped its rule making authority by attempting to regulateIRA assets.

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The Fifth Circuit overturned the rule after three lower courtrulings upheld it. The Trump Administration's Labor Departmentdropped its defense of the rule when it opted to not petition theSupreme Court to review the case.

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Instead, Labor issued a non-enforcement policy for the rule. Itis scheduled to release a revised fiduciary rule this fall.

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“In the past year, DOL appears to have done little, if anything,to warn retirement savers that they are now vulnerable toprofessionals who, according to DOL, have no obligation to puttheir clients' interests before their own,” write Sen. PattyMurray, D-WA, and Rep. Bobby Scott, D-GA, the ranking member andchair, respectively, of committees that oversee retirement policyand the Labor Department.

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The Fifth Circuit's ruling created “uncertainty and confusion”for the financial services industry, the lawmakers said.Ironically, critics of the rule alleged it sowed confusion beforeit was overturned.

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Retirement plan providers spent considerable assets to complywith the rule before it was vacated. The lawmakers are asking theGAO to analyze how those compliance efforts affected product lines,compensation models, and the impact those changes had on sales andrevenue.

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They also want to know how much was spent on compliance, whatthe overall impact was on retirement investors, and whether firmsthat changed to a fiduciary model before the rule was overturnedcontinued to operate under the new model after the Fifth Circuit'sdecision.

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The scope of the requested inquiry is substantial, and willundoubtedly required extensive coordination with industrystakeholders.

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A 2013 GAO report on 401(k) plans and IRA rollovers came after atwo-year examination.

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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.