Biden’s Junky Retirement Rule Would Raise Fees & Take Away Choices for American Savers

President Biden today announced the details of a new rule governing retirement savings, echoing an earlier “fiduciary rule” issued by the Obama administration that was struck down by a federal court. John Berlau, CEI Director of Finance Policy, explained what is wrong with the new Labor Department rule:

Since the beginning of the Biden administration’s whole-of-government crusade against so-called “junk fees,” it has been clear that that the president and his officials are often just targeting fees and practices that go against their own subjective preferences. Today’s announcement on new Department of Labor rules for retirement savings by make this subjectivity in defining “junk fees” ever more clear and take it to a new level of gall.  

The rules as outlined in this White House “fact sheet” issued today  appear to bear many similarities to the Obama-Biden DOL’s “fiduciary rule” issued in the final years of that  presidency and mercifully struck down by the Fifth Circuit Court of Appeals in the early years of the Trump administration. That rule garnered bipartisan opposition, as even center-left scholars such as Robert Litan and Hal Singer found that it would have raised or imposed new investor fees and limited both options and access to services for middle-class savers planning for their retirement.

As described in the “fact sheet,” the new Biden DOL rule would also raise fees on savers by sharply restricting commissions brokers could earn on funds and annuities they provide to savers. Currently, this compensation practice is disclosed to investors and enables brokers to charge less because of the additional compensation. The White House “fact sheet” does not dispute that fees may actually go up for savers as a result of this rule.

So how does the White House claim it is actually reducing “junk fees” from a rule that will most likely raise fees? Very cagily, in language that would be described in the private sector as “fine print.” As did the authors of the Obama rule, the Biden officials throw around a one-size-fits-all definition of “best interest” and claims that savers will in the long run gain more from any mandate that will force financial professionals to act in what the administration sees as savers’ “best interest.”  Hence, the “fact sheet” declares breathlessly, “When the saver pays for advice that is not in their best interest, and it comes at a hidden cost to their lifetime savings, that’s a junk fee.”

 Yet the Biden administration, which has consistently pushed financial institutions to invest in lower-performing industries to satisfy ESG (environment, social, and governance) criteria, is hardly a qualified judge of what is the “best interest” of American savers. And the fact is under a limited constitutional government, no politician or bureaucrat should be allowed to paternalistically decide the investment choices of American savers in the name of protecting their “best interest.” This is a choice that should be left to individual American adults working with the broker or adviser they select. The Biden administration and Congress should go back to the drawing board and only propose policies that expand, rather than restrict, investors’ choices for retirement.

Related analysis:

 “Obamacare for Your IRA,” National Review

“The Department of Labor’s Fiduciary Rule for Dummies,” (But Not the Dummies They Think We Are)”