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Flawed Fiduciary Rule Would “Hurt the Very People It’s Intended to Help”

The Subcommittee on Health, Employment, Labor, and Pensions, chaired by Rep. Tim Walberg (R-MI), today held a hearing to examine regulatory barriers facing workers and families saving for retirement. Members discussed the need to protect workers and small businesses from the flawed fiduciary rule, which would restrict access to affordable retirement advice. Members also discussed bipartisan solutions to make it easier for small businesses to provide retirement benefits to their employees.

“After decades of hard work, every American should be able to retire with dignity and peace of mind,” Chairman Walberg said. “Unfortunately, too many Americans are struggling to save for their retirement years. Now more than ever, we need policies that empower workers to put money aside for retirement … We can start by removing regulatory barriers facing retirement savers.”

The House Committee on Education and the Workforce recently sent a letter to the Department of Labor (DOL) urging further delay of the Obama administration’s flawed fiduciary rule. Witnesses echoed the need to delay the rule to protect access to retirement advice for low- and middle-income families.

“There is now clear and convincing evidence of the harm the rule as currently constituted will cause retirement savers, and DOL should ensure that it does not allow that harm to continue,” said Bradford Campbell, former assistant secretary of labor for employee benefits.

Campbell explained that the consequences of the rule are already beginning to take shape, saying, “Advisors and financial institutions reported increasing minimum asset requirements for advisory accounts” as well as “a shift from commission-based accounts to more expensive fee-based accounts.”

Campbell highlighted a survey that found “loss of advice and assistance to the very retirement savers the rule should be protecting, and who are most in need of assistance.” He noted that the average account balance of those surveyed was roughly $17,000.

James Kais, senior vice president for Transamerica, which provides retirement plan services to small businesses, spoke of the important role small businesses play in helping Americans save for retirement. “As the number of small businesses continue to grow and become a large source of new jobs, expanding retirement plan coverage among small businesses is critical to enhancing Americans’ retirement security,” he said.

Unfortunately, the “fiduciary rule restricts small employer access to advice needed in establishing and maintaining plans, as well as increases the cost of these plans,” Kais said.

Instead, Congress should make it easier for small businesses to offer retirement plans. Kais urged the subcommittee to empower small businesses to band together through “multiple employer plans” (MEPs) to “achieve economies of scale and avoid the administrative burden and liability in running the plan by turning over administration of the plan to a named plan fiduciary, recordkeeper, and plan administrator, making the plan both more affordable and effectively managed.”

Under current law, small businesses can only join together through MEPs if they’re in the same industry. There is growing bipartisan support for eliminating this unnecessary requirement.

Other witnesses underscored the need to reduce red tape surrounding retirement plans. Erik Sossa, vice president of global benefits and wellness for PepsiCo, Inc., said, “Congress should look to eliminate unnecessarily burdensome rules that divert funds from employees’ retirement benefits.”  

Sossa emphasized that Congress should modernize outdated federal rules that make it harder for retirement plan sponsors to deliver important information electronically and at a lower cost. It’s estimated that this commonsense reform would reduce disclosure costs by 36 percent.

“By eliminating hurdles to sending electronic communications to other plan participants, retirement plans will eliminate a major source of waste — and in the process, enhance the quality of communications.” Sossa said. “In addition to cost savings, modernizing electronic communication rules can enhance the quality of the communications themselves and enable employees to have easier access to relevant documents.”

In closing, Walberg expressed his commitment to advancing positive reforms that strengthen retirement security for working families:

All of the solutions I outlined have one thing in common. They would all empower workers and families to save more for retirement.

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