President and DOL Say Retirement Plan Fiduciary Regulations are Coming

In a speech to AARP President Obama and the Department of Labor laid out a plan resubmit, with some changes, a proposal that would raise investment-advice standards for brokers handling retirement accounts.  A similar rule was proposed in 2010 and withdrawn in 2011 amidst heavy criticism from throughout the investment industry.  Prior to the speech, the White House released a fact sheet characterizing the forthcoming rule as a means of protecting workers and retirees from conflicted investment advice and central to the President’s focus on “middle-class economics.”

The anticipated proposed rule would require more brokers to abide by a fiduciary standard and put the best interests of their clients above their own when providing advice on retirement savings.

The Fact Sheet indicates that the proposed regulations will:

  • Require retirement advisers to put their client’s best interest first, by expanding the types of retirement investment advice subject to ERISA. This will expose broker/dealers and investment advisers to the fiduciary standards under ERISA in addition to their existing regulatory obligations under securities laws.
  • Preserve the ability of working and middle class families to choose different types of advice. This will allow investment firms to continue to set their own compensation practices by proposing a new type of exemption from limits on payments creating conflicts of interest that is more principles-based.
  • Preserve access to retirement education. The Department’s proposal will allow advisers to continue to provide general education on retirement saving across employer-sponsored plans and IRAs without triggering fiduciary duties.

The fact sheet provides no definitive timetable for releasing the proposed regulations, which have been anticipated since the prior proposed regulations were withdrawn in 2011.  According to the Fact Sheet, the Labor Department will issue regulations “in the coming months”.  The proposed DOL rule would first need to be reviewed by the Office of Management and Budget, which could take up to 90 days or more, and would be subject to public comment.  Securities industry groups are already preparing to fight the anticipated regulations, as they did effectively in 2011.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for almost sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.