Timing of DOL study on retirement savings draws rebuke from senators

Timing of DOL study on retirement savings draws rebuke from senators
Two top Republican senators claim the fiduciary rule is premature when the agency is still studying how Americans save.
MAR 14, 2016
An initiative by the Labor Department to analyze how Americans plan for retirement — including their use of financial guidance — has drawn a rebuke from two Republican senators, who say it shows the agency doesn't know enough about the topic to propose a new investment-advice rule. In the Feb. 29 Federal Register, the DOL published a request for comment about the outlines of a multi-year study that would track tens of thousands of U.S. households. Under the initiative, the DOL would collect data about contributions to retirement accounts, investment allocations, planning strategies and financial advice received. “Relatively little is known about how people make planning and financial decisions before and during retirement,” the comment request states. “Multiple waves of data drawn from various surveys will be utilized to analyze how retirement planning strategies, decisions and outcomes evolve over time.” If the agency is launching this study now, Sen. Lamar Alexander, R-Tenn., chairman of the Senate Health Education Labor and Pensions Committee, said it means that DOL is prematurely advancing a rule that would raise investment-advice standards for retirement accounts. “The Labor Department's request suggests it is blindly moving forward with policy that has the potential to cut off access to affordable retirement advice for millions of Americans and their families,” Mr. Alexander said in a statement. “The administration should withdraw this proposed rule – but, if not, Republicans will consider what options are necessary to help hard-working Americans planning for their future.” A DOL spokesman said using the study would “deepen” the agency's grasp of the retirement-investment marketplace. But it already knows enough to support the rule. “To suggest that building upon our already robust body of retirement research in some way diminishes the validity of our efforts to reduce conflicts of interest in retirement advice is simply disingenuous,” Labor Department spokesman Michael Trupo said in a statement. “To suggest that more study is needed before addressing a well-documented problem that costs workers many billions of dollars each year is troubling, to say the least.” An advocate for the DOL rule said that the agency has been studying retirement security for years and has produced a cost-benefit analysis that justifies the need for the measure. “It is patently absurd to suggest that they are moving forward blindly,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “But the harmful effect of conflicted advice is just one aspect of a much larger question – how can we improve Americans' retirement preparedness – that has been a major priority for this administration.” Republican arguments against the rule echo those of the brokerage industry, which asserts that it is too complex and costly and will price savers with modest retirement assets out of the advice market. The Obama administration maintains that the rule, which could be released in final form this month, is required to protect workers and retirees from financial advisers' conflicts of interest that result in inappropriate high-fee products being recommended for 401(k) and individual retirement accounts. Sen. Johnny Isakson, R-Ga., who's also chairman of a Senate labor subcommittee, has introduced a bill that would require Congress to approve the DOL rule before it goes into effect. “It is appalling that, by its own admission, the Department of Labor does not know enough about how individuals and families make retirement decisions, yet the Obama administration is willing to move forward with the implementation of fiduciary rulemaking,” Mr. Isakson said in a statement. Opponents are grabbing at straws, as the DOL regulation nears completion, Ms. Roper said. “They're going to seize on everything they can find to try to justify their opposition to the rule,” Ms. Roper said. “It's clear that the industry is desperate to find new arguments against this rule that don't require them to acknowledge that their real motive in opposing it is to avoid having to act in their customers' best interests.”

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