DOL Finalizes Rule to Protect Retirement Plan Investors

Amber Landis | April 6th, 2016 | MMG

Rule Designed to Avoid Conflicts of Interest

The Department of Labor on Wednesday released a final rule designed to protect investors in 401(k)s and other retirement plans.

The long-debated rule requires persons giving advice to retirement investors to act in the best interests of the investor, rather than selling financial instruments that could glean the highest fees. The rule amends the definition of “fiduciary adviser” under ERISA and broadens investment advice standards for retirement accounts. The DOL, which announced the rule at the Center for American Progress, a liberal think tank, has issued a fact sheet.

The rule will apply to all clients, firms and financial advisers in the United States. In summary:
•The industry-wide rule is intended by the DOL to eliminate the potential for any conflict of interest between a client and a financial adviser or firm with respect to retirement accounts and assets.
•Once the rule is implemented, the DOL will have a say in investments that are available to clients, types of fees, and how advisers can advise clients on their retirement account(s).
•The rule will apply only to retirement accounts, including IRAs, 401(k)s and other qualified retirement plans.

Republicans have been working to delay the rule.

House Ways and Means Committee Chairman Kevin Brady, R-Texas; Education and the Workforce Committee Chairman John Kline, R-Minn.; Oversight Subcommittee Chairman Peter Roskam, R-Ill.; and Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe, R-Tenn., issued the following statement in response to the Department of Labor’s final “fiduciary” rule:

“Helping more Americans plan for retirement is a priority we all share. That’s why we have repeatedly expressed our belief that retirement advisors should serve their clients’ best interests and then put forward bipartisan reforms that would require just that. It’s also why we urged the department to pursue a balanced approach and why we remain concerned with the far-reaching consequences of this final regulation.

“We continue to have serious concerns that these new rules will make it harder for low- and middle-income families to receive basic education about retirement savings and will create new hurdles for small business owners who want to offer their workers retirement options. These are consequences working families and job creators cannot afford. Now that the department has put forward a final rule, we plan to review it thoroughly. We remain committed to using the tools we have to help all Americans retire with the financial security and peace of mind they deserve.”

In December 2015, Republican and Democratic lawmakers introduced legislative proposals to strengthen retirement security. The Strengthening Access to Valuable Education and Retirement Support Act, led by Roskam, and the Affordable Retirement Advice Protection Act, led by Roe, would raise investment advice standards for the retirement industry to ensure financial advisers act in the best interests of their clients. The bipartisan bills passed out of committee earlier this year.


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