Department of Labor’s Rule Change Will Reduce Worker Choice and Increase Costs for 401ks and IRAs
Washington, D.C., March 2, 2011 – Today, the Department of Labor will hold a public hearing on the proposed rule amending the definition of the term “fiduciary.” This rule change will severely increase costs and reduce worker choice for people hoping to invest in 401k plans, other pensions, and Individual Retirement Accounts (IRAs). John Berlau, director of the Competitive Enterprise Institute’s Center for Investors and Entrepreneurs, will be testifying at the hearing around 2:00pm, and will be available for comment after the hearing.*
Submitted Comment by the Competitive Enterprise Institute to the Department of Labor
Ladies and Gentlemen:
On behalf of the Competitive Enterprise Institute, we are writing to submit comments regarding the proposed regulation published by the Department of Labor’s Employee Benefits Security Administration (the Department) defining the term “fiduciary” in connection with the provision of investment advice under ERISA (the Proposal).1 The Proposal would replace the current regulation at 29 CFR §2510.3‐21(c) promulgated by the Department in 1975. The Department has argued that the new rules are necessary because of changes in the market in the past 35 years. However, we believe that these changes – notably the proliferation of defined contribution plans – make such a broad definition of “fiduciary” even less appropriate now then it would have been when the majority of workers were in defined benefit plans.
We thank you for the opportunity to comment on this regulation. CEI supports the Department’s decision to review and update aging regulations. However, we are strongly concerned about the costs this proposal imposes on the investing community and the curtailment of options for individual workers planning their retirement. We also have concerns regarding the regulatory impact analysis accompanying the Proposal, and we appreciate the opportunity to share our thoughts with you.
At the outset, we have basic concerns about the thrust of this proposal. Expanding “fiduciary duty” as the Department proposes will make it harder, not easier, for workers to exercise their rights and responsibilities in their retirement plans. Individual choice is the hallmark of defined contribution plans such as 401(k)s, and we believe this proposal will make it more difficult for workers to get the information or advice they seek to make informed decisions. Plan sponsors and workers should be free to select service providers on a non‐fiduciary basis to assist them in making their own decisions—we believe the likely effect of the Proposal would be to limit the ability of plans and workers to make that choice.
› Related: Coalition Letter on Interchange Fees
› Berlau will be available for comment after the hearing and can be reached at [email protected] or at his cell, (202) 415-3192
› Read more by John Berlau on CEI.org.
* Vincent Vernuccio was originally scheduled to testify. John Berlau will testify in Vernuccio’s absence.