White House Executive Order Snares Fee Disclosure, Advice Regs

January 22, 2009 (PLANSPONSOR.com) - An executive order signed by White House Chief of Staff Rahm Emanuel, ordering a temporary moratorium on new federal rules, will mean a delay in issuing two U.S. Department of Labor (DoL) fee disclosure regulations.

Emanuel’s January 20 order may also put off the implementation date of the DoL’s recently released final rule governing the provision of investment advice to retirement plan participants (See DoL Finalizes Rules on Investment Advice ).

A Washington Post news report said agencies were ordered to pull back all proposed or final regulations that have not been published in the Federal Register  so they can be “reviewed and approved by a department or agency head.”  

For   all final regulations published in the Federal Register but not yet in effect, except for those impacting health, safety, environmental, financial, or national security matters,  the Emanuel memo asked department and agency heads to consider putting off the effective date.

Caught up in the order to stop processing unpublished rules are pending DoL proposed directives requiring service providers to disclose fees, compensation, and conflicts of interest to fiduciaries of 401(k) and other benefit plans (See  EBSA Puts out Provider Fee Disclosure Proposal ). DoL also released a proposed fee disclosure regulation for participant-directed individual account plans on July 23, 2008 (See EBSA Finishes Regulatory Package with Participant Disclosure Proposal ).

Both were still reported to be in process at the federal Office of Management and Budget (OMB) – which has to approve new federal rules – but had not been published in the Federal Register by Inauguration Day.

The advice rule was published January 21 and was originally scheduled for a March 23 effective date. T he rule implements the new statutory exemption for investment advice added to the Employee Retirement Income Security Act (ERISA) by the Pension Protection Act (PPA) and a related class exemption.

However, the advice rule may run into problems because of significant opposition from House Education and Labor Committee Chairman George Miller (D-California) who has vowed to block it (See  Miller, Andrews Threaten to Block Advice Regulation ).

The Washington Post said the directive has become a tradition among presidents going back to Ronald Reagan in 1981. The newspaper pointed out that George W. Bush and Bill Clinton had similar orders issued at the outset of their administrations.

Gloria D. Della, spokeswoman for the DoL's Employee Benefits Security Administration (EBSA), said in a statement that the advice rule and regulations governing two EBSA forms were too far along in the process to be pulled back. The department is otherwise continuing to work to implement the White House order, she said.

"Upon receipt of the memorandum issued by the Chief of Staff, career officials at the Department of Labor took immediate steps to comply," Della said in the statement. "Because two rules were on file for public inspection on Friday, it was not possible to withdraw them from publication. Neither of these rules (Investment Advice - Participants and Beneficiaries and changes to the Form LM-2 and LM-3) is immediately effective. The Department is working to identify all rules that may be affected by the memo and to take the necessary action."

The Emanuel memo is available here .

The advice regulation is available here .