Today, the Biden Administration greenlit the U.S. Department of Labor’s (DOL) investment advice rule, which will hamper the efforts of millions of workers and retirees to achieve a secure and dignified retirement.
DOL attempted a substantially similar rule in 2016, resulting in over 10 million retirement account owners, with over $900 billion in retirement savings, losing access to their preferred financial professionals.
Thankfully, a federal court found that DOL did not have the authority to adopt that rule and vacated it in 2018. DOL is now trying again, despite that court ruling and in denial of the harm it will cause for many retirement savers.
A 2021 study showed that adopting a substantially similar rule to DOL’s 2016 effort would reduce the accumulated retirement savings of 2.7 million individuals with incomes below $100,000 by approximately $140 billion over ten years. It would also increase the wealth gap for Black and Latino workers and retirees by about 20 percent.
These are hardships that today’s workers and retirees cannot afford. Retirement saving in the modern era rests on workers’ shoulders, often through workplace defined contribution plans, as private sector defined benefit pensions have declined.
More than ever, consumers need access to knowledgeable financial professionals who can help create a holistic retirement plan through strategies and solutions, including annuities, that produce protected, sustainable income for as long as they live.
Unfortunately, based on our preliminary review, it appears that the regulation will make it much more expensive and difficult, if not impossible, for many consumers to access reliable professional assistance.
Without such assistance, many retirement savers will struggle to understand and fully realize the benefits of the SECURE Act and the SECURE 2.0 Act, major bipartisan retirement reform measures recently enacted by Congress to expand opportunities to save for retirement and access to protected lifetime income solutions.
DOL has said it wants to ensure that “the existing regulatory structure…properly and uniformly protects the financial interests of retirement investors as Congress intended.” We share this objective, which is why we support the best interest rules adopted in recent years by the U.S. Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC).
The SEC’s Regulation Best Interest applies nationwide, and the NAIC’s best interest model regulation has been adopted in forty-five states, covering more than 90 percent of the U.S. population. Adoption in the remaining states is expected in the coming months.
These rules require financial professionals to act in the best interest of their clients without putting their own interests ahead of clients.
There is no evidence that this enhanced and comprehensive framework, as it exists today, is not working effectively to protect retirement savers. Yet, DOL persists in inflicting an unnecessary, redundant, and harmful one-size-fits-all regulation.
Here at IRI, work is already underway to determine next steps. Our industry will always fight to protect the rights of workers, retirees, and their families to ensure that misguided government policies do not deprive them of access to retirement savings strategies, the choice of products to execute those strategies, and the right to choose their financial professional on terms that best fit their needs. You can count on that.
Contact: Dan Zielinski
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