The White House Office of Management and Budget finished its review of the Department of Labor’s fiduciary rule Wednesday, according to the office's website.

“The abbreviated OMB review was not unexpected,” said policy consultant Duane Thompson, president of Potomac Strategies LLC.

He noted that a quick approval means the rule would be subject to the review of the current Congress, eliminating the risk that a Republican controlled Congress could overturn the rule next year.

“The DOL has been pushing hard to get this rule out the door before it becomes vulnerable to vacatur under the Congressional Review Act [CRA] next year if Republicans gain control of Congress and the White House," Thompson said. “Once the final Retirement Security Rule is published, like the 2016 version expect a flood of lawsuits filed immediately by industry opponents to overturn it. They could also use the legislative process this year, but a CRA resolution would have little chance of surviving a Biden veto."

The OMB began its review of the “Retirement Security” rule March 8 and completed it on April 10—lightning fast by government standards.

That was too speedy for at least one GOP Congressional leader, who questioned the OMB’s perceived rush. “OMB’s swift conclusion in its review of this fiduciary rule gives rise to serious questions as to whether the agency has extended due consideration to stakeholder input and allowed their views to be fully heard and accounted for in this process,” Rep. Virginia Foxx of North Carolina, who chairs the House Education and the Workforce Committee. “The pattern of behavior that the agency has exhibited thus far shows a blatant disregard for doing so—OMB would do well to get its act together.” 

While attorneys, analysts and trade groups have yet to see the final rule, it is expected to track the draft version and greatly expand the definition of fiduciary advisor to include brokers and insurance agents who offer rollover retirement advice. The rule is also expected for the first time to apply the fiduciary rule to one-time advice and variable annuities recommendations.  

“With the completion of OMB’s review, the next step would be for DOL to announce the final rule,” Dan Zielinski, a spokesman for the Insured Retirement Institute, said in a statement. “We do not know when that will occur, but IRI will be prepared with a statement after reviewing the final rule.” Zielinski noted that the OMB is still scheduled to meet with some stakeholder groups through April 15.

“With the OMB completing its review, it is likely that the final fiduciary regulation and the related exemptions will be public by the end of this month and published in the Federal Register within days after that,” Fred Reish, a partner at Faegre Drinker said.

Because of the speed of the rulemaking, the rules will be subject to the Congressional Review Act by this Congress, and not the next. “The significance is that, with a Democratic Senate and president, there is virtually no chance that the rules would be overturned. However, if after the November elections, the Republicans gain control both Houses of Congress and the White House, the CRA could be used to invalidate the rules. My suspicion is that someone is watching the clock,” Reish said.

Once the final regulation and exemptions are published in the Federal Register, they will become effective 60 days later, he said.

The business activity most likely impacted by the amended rules will be annuity sales by independent insurance agents and the insurance companies that sell through those agents, he said. A second group will likely be smaller broker-dealers and investment advisory firms that did not get into full compliance with the current version of PTE 2020-02, Reish added.

“There will certainly be lawsuits filed. Most likely the trade groups for insurance companies and independent agents will lead those litigation efforts, although I also expect other groups with financial service company member to be in the fight as well,” he said.

The plaintiffs will likely file with a U.S. District Court in the 5th Circuit covering Texas, Louisans and Mississippi “because they will be forum shopping for a conservative judge and the ability to appeal to the most conservative appellate court—the Fifth Circuit Court of Appeals. It was the Fifth Circuit that struck down the Obama-era fiduciary regulation,” Reish concluded.