‘Not The Appropriate Approach’: Ron Estes Calls Out Acting Labor Sec. Julie Su For Proposed DOL Rule

4 months ago

On Wednesday, Rep. Ron Estes (R-KS) questioned Acting Labor Secretary Julie Su on proposed DOL retirement rules durign a House Education and Workforce Committee hearing.

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Transcript

00:00The representative from Kansas, Mr. Estes, is recognized.

00:03Thank you, Chairman, and thank you, Acting Secretary Hsu, for being here.

00:08I know you've been here for a long time, so I'll try to go through quickly with my comments.

00:12I know last week the Department of Labor issued a so-called retirement security rule, better

00:19known as the fiduciary rule.

00:20I have some major concerns about the substance and the impact of the rule, but I'll get to

00:25it in a minute.

00:26But the administration's rollout of the rule is also disappointing.

00:29I know several of my colleagues before have talked about how it was rolled out.

00:34There were only 45 business days.

00:36It was over a holiday period.

00:38So it really was not the appropriate approach of how do you get comments back for the comment

00:45period.

00:46But instead of talking about that, I want to talk about the White House in the rollout

00:51of that used the term eliminating junk fees as part of the reason for doing this.

00:58And that's the first time ever that annuities have ever been accused of having junk fees.

01:03And so clearly my concern is there's just a propaganda aspect of that.

01:08Can you explain how that term applies to the proposed and the final rule?

01:13And if not for this rationale that the White House is trying to hype some phrase, can you

01:19explain why there's no single reference to junk fees in any of the preambles for the

01:23proposed or the final rules?

01:25Yeah.

01:26Thank you, Congressman.

01:27So our public comment period was 60 days.

01:30We held two public hearings as well.

01:33We received 400 individual comments, over 400, and just under 20,000 petition submissions.

01:40And I will say again that that public comment period is incredibly valuable.

01:44It's very important.

01:45We take into account the comments that we get and we try to put out a rule that is as

01:52achieves the goals of whatever that rule is.

01:57So the junk fees is what I'm really wanting to focus on, not the number of comments.

02:01That's a fair question.

02:02So our rule seeks to make sure that any retiree, an investor, that the advice they get from

02:11a financial advisor is in their best interest, not informed by conflicts of interest of the

02:18financial advisor.

02:20And one way that that conflict of interest could come into play is that there could be

02:25a fee that the retiree has to pay.

02:29Yes.

02:30There's a difference.

02:31And I understand, and we would expect people to get paid a fee for providing a service.

02:35And I guess it's just, it's an insulting terminology that's used for folks that are actually trying

02:40to help people save for their retirement.

02:42And I take offense at the term junk fees being used in that manner.

02:46And I shift gears a little bit on this, just from a standpoint of the cost, as we're talking

02:51about fees, you know, just prior to the release of the fiduciary rule, the inflation numbers

02:56came out hotter again for the third month in a row.

03:00Since President Biden's been in office, the cost of inflation on a monthly basis has gone

03:04up over 19%.

03:06And the joint economic committee has determined that in my home state of Kansas, people are

03:11paying $1,000 more a month for the same food, the same rent, as they did in January of 2021.

03:20And wages are down 3.9% in terms of net wages since the president's come into office.

03:27So at a time when people are struggling to meet their daily needs with inflation, I'm

03:34concerned a little bit about the higher costs that are being applied to people that are

03:37trying to save.

03:39You know, there was a delight study done after the earlier fiduciary rule was brought out

03:43that more than 10 million low- and middle-income individuals lost access to investment assistance

03:50during the short time that that 2016 fiduciary rule was effective.

03:54I mean, I personally saw middle-class savers who were having to pay more in fees because

03:59of that fiduciary rule.

04:01And fortunately, the Fifth Circuit rescued American people from that.

04:05And with this new rule, it seems like the administration is wanting millions of more

04:08people of lower- and middle-income to be able to lose access to investment assistance and

04:13have to spend more money to keep that access.

04:17So how many individuals does the department expect to lose access to investment because

04:21of the new fiduciary rule?

04:23Well, Congressman, also to be clear, I wasn't referring to any fee that an advisor charges

04:28as being a junk fee.

04:29I'm referring to fees that are charged to an investor that would not be charged but

04:34for that conflict of interest, right, a fee that they're paying for an investment vehicle

04:38that is not in their best interest.

04:40But we certainly – our goal is for – to expand retirement security, not to shrink

04:48it.

04:49But I guess my concern on this question was people losing access because of cost and because

04:54of the additional burden placed on the investment advisors.

05:00Well, our hope is that by eliminating conflicts of interest, that retirement savers actually

05:08do better.

05:09They actually – their investments are actually being put into vehicles that maximize their

05:15savings.

05:16And as was noted earlier, there are studies that show that just –

05:19I'm glad that's a shared hope, and I'm sorry to cut you off.

05:23I am out of time.

05:24And it's just that prior studies, particularly the Deloitte study, shows people that have

05:27lost access.

05:29That's my concern, that we're not helping people save for their retirement.

05:32I yield back, Mr. Chairman.

05:34The Ranking Member, Mr. Scott, is recognized for five minutes.

‘Not The Appropriate Approach’: Ron Estes Calls Out Acting Labor Sec. Julie Su For Proposed DOL Rule

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