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Key GOP Senators Say DOL Fiduciary Rule Could Restrict Access to Advice

A group of eight Republican senators, including the Chairmen of the Senate Finance Committee and the Senate Committee on Health, Education, Labor & Pensions (HELP), have expressed their concerns about the potential negative consequences for American workers if the Labor Department’s fiduciary reproposal hasn’t changed significantly from the 2010 version.

The senators expressed their concerns in a letter to Office of Management and Budget (OMB) Director Shaun Donovan, whose agency is currently reviewing the proposal. Late last month, President Obama not only lent his support to the initiative, but encouraged the DOL to send the measure to OMB for review.

In the letter, the senators warn that the failed 2010 rule “likely would have inhibited workers’ access to affordable retirement planning assistance and product choices” and may have “negatively affected workers’ financial literacy and resulted in Americans making retirement decisions without the best available information,” ultimately harming the retirement security of millions of workers and their families.

“[T]hirty-four percent of surveyed small businesses who offer retirement plans recently indicated that a re-proposed rule similar to the 2010 rule would make it at least somewhat likely that they would spend less money and time on employee education,” the senators noted. “Moreover, a rule similar to the 2010 rule may bring an end to call centers and broker-dealer assistance that have customarily helped consumers understand what retirement savings options are available upon termination from a company. Eliminating this source of financial literacy has been estimated to increase annual retirement savings withdrawals by an additional $20 to $32 billion.”

The letter, which offers OMB Director Donovan several points of consideration while reviewing the proposed rule, was signed by Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Senate HELP Chairman Lamar Alexander (R-Tenn.), as well as Senators Mike Enzi (R-Wyo.), Richard Burr (R-N.C.), Johnny Isakson (R-Ga.), Mark Kirk (R-Ill.), Tim Scott (R-S.C.), Pat Roberts (R-Kans.) and Bill Cassidy (R-La.).

The consideration points listed in the letter are:

  1. Consider whether there is a systemic problem, or are any real-world examples of concerns, this proposed rule intends to address. 
  2. Consider whether, and by how much, costs for professional investment guidance, education, and/or advice may increase if the proposed rule is adopted.
  3. Consider how the proposed rule would impact retirement savings generally and whether consumer and/or plan sponsor access to guidance, education and/or advice would be affected.  
  4. Consider what percentage of workers may cash out their retirement savings when switching jobs or retiring due to a lack of retirement planning assistance if the proposed rule is adopted. 
  5. Consider whether investment advisers would no longer offer services for employee retirement plans and/or IRAs if the proposed rule is adopted. 
  6. If the proposed rule drives advisers to a fee-based model and is adopted, consider whether advisers who adopt a fee-based model will actually increase costs for a “buy and hold” investor (i.e., an investor with an account that is not actively traded) as compared to a commission-based model.
  7. Consider how many IRA investors may no longer qualify for an advisory account if the proposed rule is adopted. 
  8. Consider the percentage of small businesses with a retirement plan that may reduce their contribution match, offer fewer investment options, increase fees charged to plan participants, or drop their retirement plan altogether if the proposed rule is adopted.  
  9. Consider whether small business plan sponsors and others will experience any regulatory or paperwork burdens if the proposed rule is adopted. 
  10. Consider working with the SEC and other federal agencies, including independent agencies, and non-governmental organizations authorized by Congress (e.g., FINRA), to avoid regulation that “may be redundant, inconsistent and/or overlapping.”
  11. Consider taking into account the SEC’s oversight and rulemaking authority in this area, especially in light of the authority provided to the SEC under the Dodd-Frank Act.