Skip to content

Democrats Demand Trump Administration Rescind Proposals Leaving Workers’ Retirement Savings at Risk


Members: “These proposals would move the nation backwards by reinstating a broken status quo that allows financial advisors to evade their fiduciary duties and denying retirement savers meaningful remedies when they have been harmed.”


WASHINGTON – Yesterday, in a letter to Labor Secretary Eugene Scalia, Senate Health, Education, Labor, and Pensions Committee Ranking Member Patty Murray (D-WA), House Education and Labor Committee Chairman Robert C. “Bobby” Scott,  House Financial Services Committee Chairwoman, Maxine Waters, Senate Banking Committee Ranking Member, Sherrod Brown (D-OH), and Senate Finance Committee Ranking Member Ron Wyden (D-OR), led 24 of their Democratic colleagues in opposing the Department’s retirement investment advice rules. These rules help financial advisors evade their responsibility to clients—leaving hardworking retirement savers at risk and without any meaningful remedies when they have been harmed.


Millions of Americans seek financial advice on investing their hard-earned retirement savings, but the advice they receive is not always in their best interests. Retirement advisors sometimes provide “conflicted advice,” in which an advisor steers a client toward investments that are lucrative for the advisor, even if it’s not right for the client. In fact, analysis shows conflicted advice costs workers an estimated $17 billion in retirement plan losses every year.


In the letter, the Members note that the Obama administration addressed the issue of conflicted advice by establishing a rule that closed decades-old loopholes to protect retirees. Instead of defending the Obama-era rule protections in court or improving upon them, the Trump administration reinstated an outdated and loophole-ridden standard that allows unethical advisors to cheat their retirement clients without providing the American public an opportunity to comment. Additionally, the Trump administration proposed a rule that gives workers no legal recourse when they’ve been cheated by financial advisors while investing their retirement savings.


“At a minimum, workers investing their hard-earned savings for their retirement should have confidence that financial advisors are acting in their best interest and not providing them with conflicted advice,” the Members wrote. “The Department’s continued insistence on enforcing these restrictions will further harm vulnerable students and make it harder for institutions to provide effective support.”


The Members also called out the Department for rushing through the rulemaking process despite requests from stakeholders for a more deliberative process. Senator Murray and Congressman Scott previously called for the Department to extend the unusually short 30 day comment period—which it refused to do. Senator Murray also requested the Department of Labor hold a hearing on the proposal. While ERISA states the Secretary may not grant prohibited transaction exemptions like those advanced by these proposals “unless he affords an opportunity for a hearing”—the Department refused to hold such a hearing.  

The letter was also signed by Senators Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Cory Booker (D-NJ), Chris Van Hollen (D-MD), Tammy Baldwin (D-WI), Tammy Duckworth (D-IL), Kirsten Gillibrand (D-NY), Dick Durbin (D-IL), Bob Casey (D-PA), Kamala Harris (D-CA), and by 14 additional House Democrats.


Read the full text of the letter below. PDF available here.


August 6, 2020


The Honorable Eugene Scalia


U.S. Department of Labor

200 Constitution Avenue, N.W.

Washington, DC  20210


Dear Secretary Scalia:


We write in strong opposition to the Department of Labor’s (DOL) final rule entitled “Conflict of Interest Rule – Retirement Investment Advice: Notice of Court Vacatur” (RIN 1210-AB96) and its proposed rule entitled “Improving Investment Advice for Workers & Retirees” (ZRIN 1210-ZA29).  Taken together, these proposals would move the nation backwards by reaffirming a broken status quo that allows financial advisors to evade their fiduciary duties and denies retirement savers meaningful remedies when they have been harmed.


When Americans seek financial advice on how to invest their retirement savings—particularly when they roll over assets from their workplace 401(k) plan into an Individual Retirement Account (IRA)—they often make one of the biggest financial decisions of their lives.  These workers may not have experience or expertise in managing investments, so they place their trust in an advisor to help ensure they do not outlive their retirement savings.  Many advisors do right by their retirement clients, but some do not.  An unscrupulous advisor can steer a retirement client toward an investment that provides a larger financial incentive for the advisor even if it is not the best choice for the client.  This practice is known as providing ‘conflicted advice.’  According to the Obama Administration’s analysis, this conflicted advice costs retirement plan participants $17 billion in losses every year.[1]  Further, attorneys who are members of the Public Investors Arbitration Bar Association (PIABA) have seen tens of thousands of victims of conflicted advice.[2]  PIABA indicated that “[a]lmost every week” a retiree comes to their attorneys’ offices “who has lost a substantial amount of his life savings.  These are often proud, strong workers that have saved to pay off their house, put their children through college and build a nest egg – all on middle-income salaries.”[3] 


Unscrupulous advisors can get away with providing conflicted advice due to a regulation that dates to 1975.  That regulation sets forth a five-part test that must be met in its entirety for an advisor to be held to the Employee Retirement Income Security Act’s (ERISA) fiduciary standard when providing retirement investment advice.[4]  A fiduciary standard ensures that advisors have to put their retirement clients’ interests first.[5]  Specifically, under the five-part test, an advisor must: 

(1) make recommendations on investing in, purchasing, or selling securities or other property, or give advice as to their value;

(2) on a regular basis;

(3) pursuant to a mutual understanding that the advice will;

(4) serve as a primary basis for investment decision, and;   

(5) will be individualized to the particular needs of the plan.[6]


The five-part test from 1975 has not kept pace with the changed retirement savings landscape.

It was promulgated prior to the existence of 401(k) plans and widespread investments in IRAs.  Defined contribution (DC) plans have largely replaced traditional defined benefit (DB) pensions as the primary retirement plans offered by employers.  Over the past 45 years since the five-part test was promulgated, workers have become increasingly responsible for their own retirement investment decisions to ensure they do not outlive what they have saved.  According to the DOL’s data, 93.4 percent of pension plans in 2017 were DC plans, and roughly 68 million Americans were responsible for directing some or all of their investments in a 401(k)-type retirement plan.[7]  As of mid-2019, roughly 36 percent of U.S. households owned an IRA either in addition to a workplace retirement plan or as their only retirement account.[8]  According to the Investment Company Institute, “the most recent available data show that households transferred $431 billion from employer-sponsor (DC and/or DB) retirement plans to traditional IRAs in 2016.”[9]


In addition, since 1975, loopholes have emerged in the five-part test that unscrupulous advisors can exploit.  For instance, an advisor or firm providing one-time investment advice to a retirement client about rollovers from an employer-sponsored retirement plan—such as from a 401(k) to an IRA—does not have to abide by a fiduciary obligation because it does not meet prong #2 (provide advice “on a regular basis”), even though the transaction could involve large sums of money.  And, according to the Consumer Federation of America, “[e]ven when a firm does provide advice on a regular basis, they can still evade their fiduciary obligations under prong #4 by claiming they never intended for their advice to serve as the ‘primary basis’ for the retirement savers investment decision.”[10]  Such claims can be buried in the fine print of investment documents. 


The Obama Administration sought to address this insidious problem of conflicted advice by promulgating a rule holding those who provide retirement investment advice to a fiduciary standard.  We strongly supported the Obama-era rule.  It closed the above-mentioned loopholes in the five-part test.  To continue to allow fiduciaries to receive commissions and other forms of compensation and not violate ERISA’s prohibited transaction provisions, the Obama-era rule included a prohibited transaction exemption (PTE) that was known as the “Best Interest Contract (BIC) Exemption.”[11]  In order to receive this PTE, advisors had to take a number of steps,  including contractually acknowledging a fiduciary relationship that provided a right to bring class actions against the investment advisor or firm.  The Obama-era rule also was the product of a thorough and transparent process, which included a public comment period that was more than double the amount of time the DOL has provided in its comment period for this comparable rulemaking.  There is also evidence to suggest the Obama-era rule, which went into partial effect in June 2017, was having a positive impact for investors.  According to a recent policy paper, as a result of the rule, “the sales of high-expense variable annuities fell by 52% as sales became more sensitive to expenses and insurers increased the relative availability of low-expense products.”[12] 


As you know, the Obama-era rule faced multiple legal challenges. Several federal district courts and the 10th Circuit Court of Appeals upheld it.[13]  However, in response to a legal challenge against the rule that you led, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit vacated the rule in toto in March 2018.[14]  The vacatur had the effect of reinstating the five-part test.  Shortly after the Fifth Circuit’s decision, the DOL announced it would not enforce the Obama-era rule throughout the United States (rather than not enforce it just in the three states covered by the Fifth Circuit).  Unfortunately, the Trump Administration declined to appeal to the Fifth Circuit en banc or appeal the decision to the U.S. Supreme Court.


Rather than spend the past two years thoughtfully revisiting the issue in a way that would protect retirement savers from conflicted advice and modernizing the loophole-ridden five-part test, the DOL squandered the opportunity.  The DOL merely opted to reaffirm the court’s decision by reinstating the five-part test as a final rule.[15]


Reinstating the five-part test as a final rule harms workers and families planning for a secure retirement.


We now live in a “do it yourself” retirement world.  Those workers who are fortunate enough to have a 401(k) plan through their employer must figure out how best to manage it.  The same is true for those workers who are about to retire and are considering rolling over the assets they have accumulated.  Against this backdrop, the DOL unfortunately concluded the five-part test remains as appropriate for retirement savers today as it may have been 45 years ago.


As noted above, the five-part test has loopholes that can be easily exploited, particularly because every prong must be met for an advisor to be deemed as providing fiduciary investment advice.  For instance, only advice that is furnished on a “regular basis” is considered fiduciary investment advice.  As a result, one-time recommendations—no matter how consequential—will be exempted.  Many workers and their families do not have an on-going relationship with a financial advisor.  They may only engage an advisor on a one-time basis to invest their retirement assets.  Similarly, a small retirement plan that may hire an advisor as a consultant on a one-time basis for an investment recommendation would be at risk.  According to the Obama-era DOL, “[e]ven if the plan is considering all or substantially all of the plan’s assets, lacks the specialized expertise necessary to evaluate the complex transaction on its own, and the consultant fully understands the plan’s dependence on his professional judgment, the consultant is not a fiduciary because he does not advise the plan on a regular basis.  The plan could be investing hundreds of millions of dollars in plan assets, and it could be the most critical investment decision the plan ever makes, but the adviser would have no fiduciary responsibility under the 1975 regulation.”[16]


Even when firms or advisors provide advice on a regular basis, they can still easily evade their fiduciary duty.  As the Consumer Federation of America has suggested, they can do so “by claiming they never intended for their advice to serve as the ‘primary basis’ for the retirement savers investment decision.”[17]  The Obama-era DOL identified the disconnect between what retirement investment marketing materials sometimes say and the fiduciary protections retirement savers actually receive.  In its 2015 proposed rule, the DOL said:


Many brokers market retirement investment services in ways that clearly suggest the provision of tailored or individualized advice, while at the same time relying on the 1975 rule to disclaim any fiduciary responsibility in the fine print of contracts and marketing materials.  Thus, at the same time the marketing materials may characterize the financial adviser’s relationship with the customer as one-on-one, personalized, and based on the client’s best interest, footnotes and legal boilerplate disclaim the requisite mutual agreement, arrangement, or understanding that the advice is individualized or should serve as the primary basis for investment decisions.[18] 


With respect to rollovers, the DOL requires such decisions to satisfy all parts of the five-part test. The DOL also “acknowledges that advice to take a distribution from a Plan and roll over assets may be an isolated and independent transaction that would fail to meet the regular basis prong.”[19]  This does not give workers and their families much certainty that they are guaranteed to receive fiduciary investment advice.  In fact, we remain concerned that far too few rollovers will be covered, and far too many retirement savers will continue to receive conflicted advice when making rollover decisions.  According to an analysis by the Obama Administration when finalizing its fiduciary rule, an “ERISA plan investor who rolls her retirement savings into an IRA could lose 6 to 12 and possibly as much as 23 percent of the value of her savings over 30 years of retirement by accepting advice from a conflicted financial adviser.”[20]


Reinstating the five-part test as a final rule deviates from the DOL regulatory agenda and needlessly deprives the public of an opportunity to comment.


In issuing the five-part test as a final rule, the DOL noticeably deviated from how it publicly signaled it planned to proceed.  In its two most recent regulatory agendas (Fall 2019 and Spring 2020), the DOL listed its work on the “Fiduciary Rule and Prohibited Transaction Exemptions” as in the “Proposed Rule Stage.”[21]  The regulatory agendas clearly stated “the Department is considering regulatory options in light of the Fifth Circuit opinion.”[22]  The agendas gave the public a false sense of confidence that, regardless of which regulatory option the DOL chose, it would be noticed in the form of a proposed rule with an opportunity for comment.  It is curious and unfortunate the DOL did not proceed with this entire rulemaking in the way it repeatedly indicated it would in its public-facing regulatory agendas.  Further, it raises legitimate questions as to what exactly changed at the DOL from the publication of these regulatory agendas to the promulgation of this final rule.


As part of this rulemaking, the DOL issued a proposed PTE that would permit investment advice fiduciaries to receive compensation as a result of providing fiduciary advice.  Aligned with the Securities and Exchange Commission’s (SEC) Regulation Best Interest (Reg BI) standard, the proposed PTE requires advisors to do some of the same things that were required under the BIC Exemption.  For instance, they must adhere to an impartial conduct standard and a reasonable compensation standard.  Advisors also must make no materially misleading statements.


However, unlike the Obama-era rule, the DOL does not include a contractual acknowledgement of the fiduciary relationship that establishes a private right of action.  The DOL’s proposed PTE clearly states “[t]he Department does not intend the fiduciary acknowledgment or any of the disclosure obligations to create a private right of action as between a Financial Institution or Investment Professional and a Retirement Investor and it does not believe the exemption would do so.”[23]  As a result, retirement savers have no meaningful remedy when they have been harmed.  


The DOL did not meet its obligations under ERISA in proposing this PTE.


Section 408 of ERISA requires that PTEs only be granted when the Secretary finds the exemption is “(1) administratively feasible, (2) in the interests of the plan and of its participants and beneficiaries, and (3) protective of the rights of participants and beneficiaries of such plan.”[24]  Although the proposed PTE mentions these statutory mandates, it does not answer a threshold question.  Namely, how can the DOL make a finding that this proposal is in the interests of and protective of participants and beneficiaries when it does not maintain the same level of protections as the Obama-era rule, specifically, robust conflict elimination, protocols for mitigation, and a mechanism for enforcement.  Without these protections, retirement savers may falsely believe they are more protected than they are.  While the DOL may say it requires advisors to disclose in writing they are fiduciaries,[25] disclosure on its own is insufficient to protect investors.


Additionally, ERISA dictates the process by which exemptions must be granted and the DOL has not met either of those requirements.  First, ERISA provides that “adequate notice be given to interested persons.”[26]  The DOL provided a 30-day comment period for this proposed exemption, which overlaps with another related proposed rulemaking[27] and a request for information[28]—all with 30-day comment periods.  This is an inadequate amount of time to review such an important rule and determine how the proposals might work together.  There were numerous requests to extend this comment period[29] in order to thoroughly review the rule and its implications and, to date, the DOL has not been responsive to those requests.  Moreover, ERISA requires that the Secretary “affords an opportunity for a hearing and makes a determination on the record with respect to the findings.”[30]  There also have been requests for the DOL to hold a hearing on this proposal.[31]  Rather than engage with stakeholders, the DOL has remained silent.


In an editorial for the Wall Street Journal regarding the “hard work of the rule-making process,” you once explained that “[u]nder law, an agency must listen carefully to what the public says about a proposed regulation, reconsider its approach in light of that public input, and then cogently explain (not merely assert) why it made the regulatory choices it did in crafting the final rule.”[32]  Yet, the DOL chose not to operate in that manner with regard to this final rule and proposed PTE.  This is especially unsettling given your leading role in the financial services industry’s successful defeat of the DOL’s 2016 conflict of interest rule was raised at your Senate confirmation hearing.[33]  There was an expectation that you would have recused yourself from participating in the rewriting of the rule.  Instead, the DOL determined last October that applicable ethics and conflicts of interest rules did not require you to recuse yourself from the rulemaking.  Regrettably, your extensive track record of work on this issue lends credence to the perspective that you have been unable to approach this proposal in an unbiased manner.  At the very minimum, your participation creates the appearance of a potential conflict of interest, which raises questions around whether the DOL will appropriately consider relevant comments and data in finalizing this proposal.   




The final rule and the proposed PTE are not in the best interests of retirement savers.  The DOL should not only revisit and modernize the five-part test, but it also should meet its ERISA obligations in the PTE process.  There is no reason for the DOL to arbitrarily rush and continue down this wrong path.  At a minimum, workers investing their hard-earned savings for their retirement should have confidence that financial advisors are acting in their best interest and not providing them with conflicted advice.  Quite simply, the final rule and proposed PTE fail to deliver that result.  We urge the DOL to immediately withdraw both the final rule and proposed PTE and start over with a focus on the best interests of workers and retirees.





[1] “The Effects of Conflicted Investment Advice on Retirement Savings,” Obama White House Archives (Feb. 2015),

[2] Public Investors Arbitration Bar Association, Statement for the Record Submitted to the U.S. Department of Labor, Employee Benefits Security Administration, Conflicts of Interest Proposed Rule (Aug. 11, 2015),

[3] Id.

[4] U.S. Dep’t of Labor, Definition of ‘Fiduciary,’ 40 Fed. Reg. 50,843 (Oct. 31, 1975) (to be codified at 29 C.F.R. § 2510.3-21(c)(ii)(A)–(B)),

[5] U.S. Dep’t of Labor, Definition of the Term ‘Fiduciary,’ 80 Fed. Reg. 21,928 (Apr. 20, 2015) (to be codified at 29 C.F.R. pts. 2509, 2510),

[6] U.S. Dep’t of Labor, Definition of ‘Fiduciary,’ 40 Fed. Reg. 50,843 (Oct. 31, 1975) (to be codified at 29 C.F.R. § 2510.3-21(c)(ii)(A)–(B)),

[7] U.S. Dep’t of Labor, Emp. Benefits Sec. Admin., Private Pension Plan Bulletin Historical Tables and Graphs 1975-2017 (2019), at 1, 32,

[8] Investment Company Institute, The Role of IRAs in US Households’ Saving for Retirement, 2019, 25 Inv. Co. Inst. Res. Persp. 10 (Dec. 2019),

[9] Id. at 11–12.

[10] Fact Sheet, Consumer Federation of America, DOL Rule Would Expose Vulnerable Retirement Savers to Harmful Advice (July 2020),

[11] ERISA allows DOL to issue exemptions to prohibited transactions that allow an individual, a plan, or a group of individuals or plans to engage in transactions that otherwise would violate ERISA. These exemptions are referred to as prohibited transaction exemptions (PTEs).

[12] Mark Egan, Shan Ge & Johnny Tang, Conflicting Interests and the Effect of Fiduciary Duty – Evidence from Variable Annuities (Nat’l Bureau of Econ. Res., Working Paper No. 27577, 2020),

[13] Mkt. Synergy Grp., Inc. v. Acosta, No. 17-3038 (10th Cir. Mar. 13, 2018); Mkt. Synergy Grp., Inc. v. U.S. Dep’t of Labor, 16-CV-4083-DDC-KGS, (D. Kan. Feb. 17, 2017); Chamber of Com. of the U.S. et al. v. Hugler, No. 3:16-cv-1476-M (N.D. Tex. Feb. 8, 2017); Nat’l Ass’n for Fixed Annuities v. Perez, 16-cv-1035, 2016 WL 6573480 (D.D.C. Nov. 4, 2016); Thrivent Fin. for Lutherans v. Perez, No. 0:16-cv-03289 (D. Minn. Sept. 29, 2016).

[14] Chamber of Com. of the U.S. et al v. Acosta, No. 17-10238 (5th Cir. Mar. 15, 2018) (vacating the fiduciary rule in toto),

[15] U.S. Dep’t of Labor, Conflict of Interest Rule–Retirement Investment Advice: Notice of Court Vacatur, 85 Fed. Reg. 40,589 (July 7, 2020) (to be codified at 29 C.F.R. pts. 2509 & 2510),

[16] Definition of the Term ‘Fiduciary,’ 80 Fed. Reg. at 21,928.

[17] Fact Sheet, Consumer Federation of America, DOL Rule Would Expose Vulnerable Retirement Savers to Harmful Advice (July 2020),

[18] Definition of the Term ‘Fiduciary,’ 80 Fed. Reg. at 21,928.

[19] U.S. Dep’t of Labor, Improving Investment Advice for Workers & Retirees, 85 Fed. Reg. 40,834 (July 7, 2020) (to be codified at 29 C.F.R. pt. 2550)

[20] U.S. Dep’t of Labor, Definition of  the Term “Fiduciary” Conflicts of Interest - Retirement Investment Advice, Regulatory Impact Analysis for Final Rule and Exemptions (Apr. 2016),

[22] Id.

[23] Id.

[24] Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1108(a)(1)–(3) (2015).

[25] Improving Investment Advice for Workers & Retirees, 85 Fed. Reg. at 40,844 (requiring disclosure in writing that Financial Institution and its Investment Professionals are fiduciaries but noting intention to avoid creating a private right of action).

[26] Id.

[27] U.S. Dep’t of Labor, Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 39,113 (June 30, 2020) (to be codified at 29 C.F.R. pt. 2550),

[28] U.S. Dep’t of Labor, Prohibited Transactions Involving Pooled Employer Plans Under the SECURE Act and Other Multiple Employer Plans, 85 Fed. Reg. 36,880 (June 18, 2020),

[29] See, e.g., Letter from AFL-CIO et. al. to Off. of Exemption Determinations, U.S. Dep’t of Labor (July 8, 2020), (requesting an extension from 30 to 90 days because “[a] 30-day comment period is an unreasonably short amount of time to provide thoughtful and comprehensive comments on this complex and highly technical proposal”); and Letter from Rep. Robert “Bobby” Scott, Chairman of House Education and Labor Committee and Sen. Patty Murray, Ranking Member of the Senate HELP Committee to Eugene Scalia, DOL Secretary (July 2, 2020) (requesting “[a]t a minimum, we request the DOL provide an additional 60 days so as to give the public a more appropriate amount of time to consider the impact of such a significant proposal and better align this comment period with past precedents.”).

[30] 29 U.S.C. § 1108(a)(1)–(3).

[31] Letter from Sen. Patty Murray to Eugene Scalia, DOL Secretary (July 14, 2020) (requesting DOL “consider a tripartite hearing that would also include the SEC to ensure that both agencies and all affected stakeholders are on the same page.”).

[32] Eugene Scalia, Why Dodd-Frank Rules Keep Losing in Court, Wall St. J. (Oct. 3, 2012),

[33] Ian Kullgren & Rebecca Rainey, Trump labor agencies ease up on recusals, Politico (Jan. 15, 2020), (“[I]n October, DOL’s ethics lawyers cleared Scalia to participate in crafting a new version of the rule.”).