Labor’s delay of retirement advisers rule could add to ‘regulatory budget’

The Labor Department’s delay of the fiduciary rule for retirement advisers opens the door for it to issue more regulations later this year, according to a new analysis.

President Trump’s executive order establishing a regulatory budget for federal agencies will be tested for the first time by the fiduciary rule, which requires financial advisers to provide clients who are saving for retirement with their best investment recommendations.

The regulatory budget requires federal agencies to repeal two regulations for each new rule they issue and make sure the cost of the rules going out offsets the cost of those coming in.

That’s where the fiduciary rule comes into play.

The Labor Department last week delayed the Obama-era fiduciary rule by 60 days, which it estimates will save industry $78 million.

{mosads}Though the fiduciary rule has not been formally repealed, the cost savings from the two-month delay could increase the Labor Department’s regulatory budget, according to an analysis by Sam Batkins, director of regulatory policy at the conservative American Action Forum.

Batkins called it the first “out” stemming from Trump’s regulatory budget.

That means the Labor Department now has a $78 million regulatory budget that the Trump administration can issue new rules with this year, if it chooses to.

Other rules that have been repealed by lawmakers through the Congressional Review Act may also contribute to an agency’s regulatory budget, but this is the first example of an agency initiating the effort, Batkins said.

Along with the fiduciary rule, the Trump administration has delayed a handful of Obama-era regulations. The reason Batkins considers the fiduciary rule the first to comply with the terms of the regulatory budget is because none of the other rules went through the formal notice-and-comment process before they were delayed.

Without the fiduciary rule in place, financial advisers must still provide good advice but are not required to offer the best advice.

Critics say this allows certain financial advisers to steer clients toward second-tier products that could make the adviser more money. But it comes at a cost to people who are saving for retirement, they say.

The AFL-CIO and Sen. Elizabeth Warren (D-Mass.) last week unveiled the “Retirement Ripoff Counter,” claiming the 60-day delay will cost workers $2.8 billion in lost retirement savings.