Think Advisor (February 15, 2024) By Allison Bell
igns that a bipartisan compromise on retirement asset rollover rules might be possible showed up Thursday during a House hearing on the U.S. Department of Labor’s new fiduciary rule proposals.
Rep. Donald Norcross, D-N.J., talked about his experience as an electrician who served as the assistant manager of his union local and helped other union members with retirement plan concerns.
He expressed horror at the idea of plan participants feeling ripped off by getting advice that produced disappointing results.
But he also objected to the idea of retirement savers failing to get adequate advice because insurance agents and others who have traditionally provided some of it are frightened that anything they say could turn them into plan fiduciaries and saddle them with poorly defined risk for bad outcomes.
“The baby is going out with the bathwater,” Norcross said. “I implore us to work together to get this right.”
What it means: Actual federal retirement advice standards could end up being different from what the Labor Department has proposed.
The hearing: The House Education and the Workforce Committee’s Health, Employment, Labor and Pensions Subcommittee held the hearing to discuss “protecting American savers and retirees from DOL’s regulatory overreach.”
Many Democrats have backed the Biden administration’s revival of the push to impose a fiduciary standard on anyone involved with helping users of 401(k) plans, IRAs or other retirement accounts to move their assets into other investment arrangements. Most Republicans have opposed the efforts.
Many Democrats at the hearing emphasized concerns about the potential impact of conflicted advice.
Rep. Mark DeSaulnier, D-Calif., cited Obama administration estimates that conflicted advice may be costing retirement savers $17 billion.
If conflicted advice cuts savers’ income by 1% per year, and the savers spend down in a normal way, “the retirement savers’ assets would be completely depleted five years early,” DeSaulnier said.
DeSaulnier did not talk about the possibility that income annuities could set a floor on retirement savers’ income.
Some Republicans on the committee pointed to the Labor Department’s regulation drafting process.
Rep. Tim Walberg, R-Mich., asked one of the hearing witnesses, Iowa Insurance Commissioner Doug Ommen, whether DOL officials had worked with state regulators on the proposal.
“The answer to that is no,” Ommen said.
Thomas Roberts, an ERISA lawyer, testified that the DOL proposals would hurt consumer education, by potentially conferring a fiduciary duty even on people who gave general advice about typical retirement savings strategies.
Jason Berkowitz, who appeared for the Insured Retirement Institute, predicted that lack of investment advice would weaken savers’ ability to use the new income planning options created by the Secure Act and Secure 2.0 Act.
Joseph Peiffer appeared on behalf of the Public Investors Advocate Bar Association and spoke in favor of the DOL proposals, citing surveys showing that 97% of investors already believe their financial professionals have their best interests in mind.
Resources: The committee streamed the hearing live on the web. A recording of the hearing and copies of the written versions of the witnesses’ testimony are available here.