Federal labor officials may soon destroy free choice in the retirement system by overhauling investment regulations, according to a report Wednesday.
The Department of Labor (DOL) has argued people are just not knowledgeable enough to plan for their own retirement. It has proposed a rule to categorize more people as fiduciaries in order to regulate them. The Competitive Enterprise Institute (CEI) warns the upcoming rule could undermine free choice and increase costs on retirees.
“Under the new rule, financial professionals who provide even one-time guidance or appraisal of investments could find themselves classified as ‘fiduciaries,'” the report detailed. “For centuries, the standard definition of fiduciary has been someone in a clear position of trust. In finance, this means someone whom the client has specifically entrusted to manage his or her assets and make investment decisions.”
Under current federal law the DOL can regulate anyone classified as fiduciary. If essentially everyone is classified as a fiduciary the department would then be able to regulate everyone. It would mean the department can limit what advise people can give or what choices people can make for their own retirement accounts. The rule has the potential to cause a significant rise in costs as well.
“Brokers would have to charge investors much more, because the DOL rule creates a presumption against brokers taking third-party commissions from mutual funds they sell to savers,” the report noted. “As a result, investors who currently pay only a small commission on the execution of an order may have to pay a much larger fee based on a percentage of their assets.”
The report also notes the rule may be illegal because it creates authorities which Congress never explicitly granted the department. The department also bypassed the Securities and Exchange Commission to advance the rule. The report urges lawmakers to rein the department in before it unilaterally expands its own power.
“Members of Congress from both parties have expressed serious concerns about the rule,” the report added. “Congress has a variety of options to block or delay implementation of the DOL rule, including defunding, voting the measure down, and rewriting the law. These options are not mutually exclusive.”
Lawmakers from both parties have worked to oppose the rule change. Democrats have expressed concern it could hurts the poor and middle class by limiting access to retirement planning. House Democrats sent a letter Sept. 24 to Secretary of Labor Thomas Perez expressing their concerns. Lawmakers have also advanced a bipartisan alternative to the rule.
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact firstname.lastname@example.org.