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Fiduciary Rule Delay: Boon or Expense?

The Department of Labor’s (DOL) Aug. 9 proposal that the transition period and full Best Interest Contract (BIC) applicability date of the fiduciary rule be delayed 18 months to July 1, 2019 no doubt was hailed by some as good news. But such a reaction is not universal.

The Economic Policy Institute (EPI) is one of them. In a recent report it suggests that a year and half delay may have an unintended effect: hurting plan participants’ bottom lines.

EPI had estimated that the delays in the rule’s implementation already cost retirement savers $7.6 billion in the next three decades, says EPI’s Heidi Shierholz. She reports that EPI estimates that an additional 18-month delay will add $10.9 billion more to that tally.

EPI says that the additional delay could cost participants in every state. Here are the 20 states where it says the 18-month delay will cost them the most over the next 30 years:

1. California: $1.2 billion
2. Texas: $646 million
3. Florida: $623 million
4. New York: $606 million
5. Illinois: $598 million
6. Pennsylvania: $502 million
7. Ohio: $453 million
8. Washington: $397 million
9. New Jersey: $391 million
10. Virginia: $355 million
11. Minnesota: $349 million
12. Michigan: $320 million
13. Massachusetts: $315 million
14. Wisconsin: $288 million
15. North Carolina: $274 million
16. Maryland: $247 million
17. Arizona: $235 million
18. Georgia: $233 million
19. Missouri: $216 million
20. Colorado: $193 million

“An additional 18-month delay would be enormously expensive to retirement savers,” argues Shierholz.

EPI says that its projections are based on a 30-year period because “losses to retirement investors will persist and compound” for a long time after any delay ends. To back its contention, EPI cites the DOL itself, which said that because of a delay, losses to retirement investors would “continue to accrue until affected investors withdraw affected funds or reinvest them pursuant to new recommendations.“ The DOL further said that losses up to then “would not be recovered, and would continue to compound, as the accumulated losses would have reduced the asset base that is available later for reinvestment or spending.”