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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 4/20/15: Retirement Fiduciary Definition; H-2B Authority Redux; Open Neutral Utility Internet Review; & Contraceptive Mandate

Posted in Agency Authority, Executive - OMB Review, Judicial Process

dawn over the capitol aocA hodgepodge of highlights from regulatory practice in the past week. The Department of Labor (DOL) today publishes its long-awaited and controversial proposed fiduciary duties rule for public comment. Slightly further down a different rocky road, DOL last week submitted two final rules to the Office of Management and Budget (OMB) that may represent an attempt to resolve the jurisdictional issues surrounding DOL’s authority to issue legislative rules for the non-agricultural temporary workers visa program. The Federal Communications Commission (FCC) was drawn down a road travelled often by the filing of new challenges to its open internet regulation. And finally, the Department of Health and Human Services (HHS) submitted a final contraceptives mandate rule to OMB for review and a new court decision may further complicate that review and a final rule’s efficacy.

Retirement Fiduciary Definition: The DOL Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice proposed rule would substantially alter the relationship between a retirement plan (and its participants) and the financial advisors to that plan by increasing the level of diligence for the financial advisor and generally restricting the financial advisors’ outside sources of income. At the same time, DOL is separately proposing, in today’s Federal Register, six revised exemptions from the fiduciary definition, with separate dockets. The highly technical proposed rule and exemptions comprise a distinct package that must be reviewed together, beginning with the proposed rule, and the comment structure appears to be divided between the proposed rule and the proposed exemptions from the rule.

DOL’s last foray into this thicket was in 2010, and before that, 40 years ago – before the creation of 401k and the growth of the Individual Retirement Account (IRA). The notice of proposed rulemaking withdraws DOL’s 2010 proposed rule, as DOL announced it would in 2011, and even contrasts the current proposal with the 2010 proposal, creating a new set of expectations and limiting the bounds of a final rule to this proposed rule.

In the few weeks prior to release, the OMB held 18 meetings with interested parties under Executive Order 12866 on the fiduciary duties rule. Interest in the proposed rule is high within the industry and should be within the general public because the rule would affect so many. The “number” of comments on this proposed rule – due July 6, 2015 – may not be particularly high, but interest will be high and the content of those comments will be substantial.

► DOL appears to have taken seriously much of the 2010 proposal rule controversy in a complicated and far reaching market where much of the benefit and cost justification is, naturally enough, theoretical. The proposed rule suggests a significant untried change in the marketplace. DOL theorizes a 10/1 benefit/cost ratio. Interestingly, perhaps lacking, and equally difficult, is analysis of the transfer of costs to plans and beneficiaries from the loss of financial advisor income from the proposed prohibited transactions. The public comments may or may not reach the issue.

H-2B Authority Redux: DOL submitted draft final Wage Methodology for the Temporary Nonagricultural Employment H-2B Program, Part 2 and Temporary Non-Agricultural Employment of H-2B Aliens (H-2B Comprehensive Rule) rules to OMB for interagency and executive review on April 13, 2015. The Part 2 rule finalizes an April 2013, interim final rule (IFR), in which the Department of Homeland Security (DHS) and DOL amended their regulations governing the methodology by which DOL calculates the prevailing wages to be paid to aliens who may be admitted to the United States as temporary non-agricultural workers, itself a response to litigation. Part 2 is not considered economically significant; the comprehensive rule, however, is deemed economically significant.

Further litigation has, as chronicled in this blog, raised more concerns about DOL’s authority, with the most recent decision, Perez v. Perez, resulting in a stay (now extended into May) of a vacatur of DOL regulations, while DOL and DHS attempt to resolve the authority problem.

► The rules submitted to OMB presumably contain both DOL and DHS views and amendments to resolve the jurisdictional problem, and the presentation of the rules as a “DOL” rule should not give pause because OMB’s docket is only a docket. OMB’s marquee that the rules are “owned” by DOL, on the other hand, might suggest that the agencies may not be taking the Bayou Lawn & Landscape and Perez litigation seriously. Serious doubt remains that DOL and DHS can salvage legislative rulemaking authority for DOL, rather than DHS.

Open Neutral Utility Internet Review: To no one’s surprise, and just as an update, multiple petitions for review were filed immediately after last week’s publication of the FCC Protecting and Promoting the Open Internet final rule. All of the petitions known thus far have been filed in the United States Court of Appeals for the District of Columbia Circuit, consistent with the Judicial Panel on Multidistrict Litigation (JPMDL) random selection of venue in that court from the previous (possibly premature) petitions:

  • U.S. Telecom Association v. FCC, D.C. Cir. No. 15-1086 (Petition for Review, filed Apr. 13, 2015);
  • National Cable & Telecommunications Association v. FCC, D.C. Cir. No. 15-1090 (Petition for Review, filed Apr. 14, 2015);
  • CTIA-The Wireless Association v. FCC, D.C. Cir. No. 15-1091 (Petition for Review, filed Apr. 14, 2015);
  • AT&T v. FCC, D.C. Cir. No. 15-1092 (Petition for Review, filed Apr. 14, 2015); and
  • American Cable Association v. FCC, D.C. Cir. No. 15-1095 (Petition for Review, filed Apr. 15, 2015).

The D.C. Circuit has consolidated all of these cases with the previously filed petition (D.C. Cir. No. 15-1063) and ordered the petitioners to file docketing statements and statements of issues to be raised by May 15, 2015.

► Petitions for review are usually notices of the broad issues presented and the briefing fills in the details of the claims made. Stand by for details as statements and the briefs are filed, but these cases appear to be “home.”

Contraceptive Mandate: HHS submitted its final Coverage of Certain Preventive Services; Eligible Organizations rule to OMB for review on April 16, 2015, a response to the public comments from its 2014 proposed rule, and, presumably, the plethora of litigation that has been generated by the controversial provisions in the Patient Protection and Affordable Care Act (PPACA or Obamacare). Little will be known about the agencies’ conformity with the plethora of court orders arising from previous versions of the rule until OMB completes review, but that review will also surely result in a final rule “consistent with change.”

In a decision that should (if not must) be addressed in the final rule, United States Supreme Court (SCOTUS) Justice Alito, sitting as Circuit Justice, ordered that the mandate of the United States Court of Appeals for the Third Circuit be recalled and stayed in Zubic v. Secretary of the United States Department of Health and Human Services. Zubic raises the core question of whether mere execution of EBSA Form 700, the DOL form that certifies an organization’s religious objection to the contraceptive mandate, burdens, in this case a Roman Catholic Church diocese’s exercise of religion under the United States Constitution’s First Amendment. The diocese maintained that completing the form, thereby triggering notification that a third-party health plan administrator must assume responsibility for providing or arranging contraceptive coverage to the diocese employees, burdened its beliefs under the Religious Freedom Restoration Act (RFRA). The procedural order, subject to Justice Alito’s further order after a response to the petition, acts as a stay, although an unusual one necessitated by the issuance of mandate prior to the lapse of time for a petition for certiorari.

► Intervening caselaw is one example of why OMB review results in changes in an agency rule and reflects the inherent problem of developing a rule against a shifting legal landscape. The rule should already reflect conformity with prior SCOTUS decisions, but those decisions are not entirely clear and Zubic poses yet another potential shift that would require further modification. The contraceptive mandate has been relative quiet recently, but the issues raised by the rule have not gone away.