A coalition of conservative groups joined the bipartisan push back Thursday against a rule which aims at restricting how people invest in retirement.
The coalition is being led by the Competitive Enterprise Institute (CEI). The goal is to stop what is known as the fiduciary rule implemented by the Obama administration. The rule restricts investment choices for retirement and savings plans. The Department of Labor (DOL) says most Americans are just not knowledgeable enough to make good investments. Arguing it hurts retirement planning and liberty, the coalition letter is urging Congress to defund the rule.
“Under the fiduciary rule, the DOL claims authority never granted by Congress to greatly restrict investment choices for 401(k)s, individual retirement accounts (IRAs) and other saving vehicles,” the letter states. “The DOL doesn’t even bother to hide its contempt for the intelligence of American savers.”
Americans for Tax Reform, the Independent Women’s Forum, Americans for Prosperity and FreedomWorks signed the letter. The problem for the coalition and many Republican lawmakers is the rule greatly restricts individual liberty and freedom of choice.
Democrats say it hurts the poor and middle-class by limiting access to retirement planning. On Sept. 24, 96 House Democrats sent a letter to DOL Secretary Thomas Perez expressing their concerns. Democratic Rep. [crscore]Gwen Moore[/crscore] led the way in building opposition among Democrats.
“This rule would severely restrict investment choices in savings plans such as 401(k)s and individual retirement accounts (IRAs),” CEI Senior Fellow John Berlau said in a statement. “Especially for poor and middle class investors, by forcing investment professionals to adhere to a one-size-fits-all definition of ‘best interest’ for assets and investing strategies.”
The Best Interest Contract Exemption will require advisers selling investment advise for commission to detail contractual disclosures of fees. Critics warn the provision will be costly to implement while exposing advisers to too much liability. This could make advisers less likely to work with lower income earners.
Congressional lawmakers already plan to challenge the rule in appropriations bills for fiscal year 2016. If successful, the DOL will be prohibited from spending any money on implementing or enforcing the rule. The DOL, however, says the restrictions will help people.
“They seldom have the training or specialized expertise necessary to prudently manage retirement assets on their own,” the rule states. “In the current marketplace for retirement investment advice, however, advisers commonly have direct and substantial conflicts of interest, which encourage investment recommendations that generate higher fees for the advisers at the expense of their customers.”
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