Economy & Budget

Delay the Fiduciary Rule: The government shouldn’t decide how taxpayers save for retirement

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The incoming administration has a large task ahead: reversing the myriad of onerous government regulations enacted over the past eight years. From the disastrous impact on our healthcare system from ObamaCare to job-killing EPA regulations, there’s no shortage of issues to tackle – the question is, where do they start? One item that should be at the top of their list is delaying one of Obama’s regulatory “achievements,” the fiduciary rule.

The fiduciary rule was introduced by President Obama’s Department of Labor (DOL) to regulate a large number of financial professionals who service 401(k) plans and individual retirement accounts. The rule mandates that these professionals serve in the “best interest” of savers when providing retirement guidance. The only catch is that government regulators will decide the definition of “best interest” and they do so by defining these professionals as “fiduciaries.”

{mosads}The rule establishes a very broad definition of “fiduciaries.” It’s so broad that financial professionals who provide even one-time guidance or appraisal of investments would be classified as such. Even retirement broker-dealers, who typically are more akin to sales people rather than investment advisers, would be governed under this rule. This not only limits the ability of financial firms to provide certain services, it also hurts Americans who work hard saving for their retirement by limiting the availability of investment advice and retirement products.

If you’re wondering why DOL is leading this and not the Securities and Exchange Commission (SEC), you’re not alone. The reason is simple – the SEC has chosen not to deem retirement broker-dealers as fiduciaries, so the Obama administration pursued the rule through DOL as a way to circumvent the process.

This tactic should come as no surprise. During President Obama’s tenure, the nation saw exponential growth in the executive branch undermining Congress and legislating through the creation of costly regulations. The fiduciary rule is considered one of Obama’s last regulatory “accomplishments,” although for many, it is burdensome and harmful, and it would effectively give the Department of Labor the authority to, “greatly restrict investment choices for 401(k)s, individual retirement accounts (IRAs) and other saving vehicles.”

As a result of the rule, Americans will have less choice when it comes to who handles their retirement investments and will make it difficult for many families to even work with investment professionals. In fact, up to seven million IRA holders could be disqualified from investment advice and the number of IRAs opened annually could be reduced by 400,000. The rule particularly harms those with lower retirement savings, including minority communities – so much so that the National Black Chamber of Commerce came out against it in 2015.

Prominent conservative groups and lawmakers are calling for the rule to be rolled back. For the House Freedom Caucus, a group of 40 conservative Republican House members, it’s among the top of the list of regulations they’re asking to be overturned by the incoming administration. When the caucus released a report at the end of 2016 listing the more than 200 rules they want axed, of which the fiduciary rule is one of the most prominent, caucus chairman Rep. Mark Meadows described this type of government intervention “economically disastrous.”

In 2015, more than 30 organizations urged Congress to defund any part of the DOL budget that would enforce the fiduciary rule. Unfortunately, they were unsuccessful in those efforts, but 2017 presents new opportunities. With new Republican majorities in Congress, and an incoming administration that is looking for ways to ease the regulatory burden on American taxpayers, the Department of Labor has the ability to delay the rule beyond its April 2017 deadline.

The new administration should delay and Congress should repeal the rule.  We need further study on how these regulations could harm taxpayers and Americans saving for retirement.

Stephen DeMaura is president of American Potential.

The views expressed by authors are their own and not the views of The Hill.


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