Whenever there is a change in the senior leadership of any organization, there is a period of uncertainty. This is true in both the private and public sectors. At such times it can be unclear whether the status quo will be maintained, or if major change in direction will occur. President Obama’s recent nomination of Thomas Perez to succeed the departing Hilda Solis as Secretary of the Department of Labor (DOL) leaves my headline question unanswered for the moment.
First, of course, comes Mr. Perez’ confirmation, and it is already clear that some Senators have a some concerns with him. Perez currently serves as Assistant Attorney General for the U.S. Justice Department’s Civil Rights Division. Among his critics, long-time Iowa Republican Senator Charles Grassley has threatened to oppose Perez’ nomination over allegations that he used his department’s influence to keep a potentially important housing discrimination case from going to the U.S. Supreme Court. Others have expressed the opinion that he has leaned toward lax enforcement of immigration rules. It remains to be seen how the nomination will proceed through Congress.
But what is of most immediate interest to the retirement industry is the direction that DOL may take on employee benefits in 2013 through 2016, during the remainder of President Obama’s second term. Perez’ predecessor Solis’ pre-DOL experience included four terms as a California congresswoman, and featured a focus on labor issues. Perez’ record of public service has had a focus weighted more heavily towards immigration and civil rights issues.
This does not mean that he doesn’t or cannot grasp labor issues, but they do not appear to be his forte. If this is an accurate assessment, then it would not be a huge surprise if Perez vision in a DOL leadership role—again, if confirmed—might logically be influenced by 2nd term holdover Phyllis Borzi, Assistant Secretary for the DOL’s Employee Benefits Security Administration (EBSA). I think it if fair to say that Borzi is considered to be among the more aggressive of recent EBSA leaders in advancing an agenda that places greater compliance demands on retirement plan sponsors and industry service providers. For example, she is believed to be an advocate for a fairly broad definition of “fiduciary,” including applying these rules to the IRA environment, something that is an item of concern for many in the financial industry and on Capitol Hill.
It is not the case that retirement industry players are anti-compliance. But there are fears that some of the directions EBSA might take would add compliance complexity and cost, without significant benefits to retirement plan participants—or IRA savers for that matter. If Perez is confirmed, it is hoped that he will become familiar with the turf on both sides of the compliance fence, and will not adopt an adversarial and litigious attitude in the mistaken belief that this is in the best interest of U.S. workers and retirement savers.
