Rep. Miller Rips 401(k) Advice Rules
The U.S. Department of Labor said it will publish two proposed rules on Friday that will make quality investment advice more accessible to millions of Americans who have 401(k) plans and IRAs. The rules, issued under the Pension Protection Act, "would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts," said Labor Secretary Elaine Chao in today's news release.
The act gives flexibility for participants of 401(k) plans and IRAs to obtain investment advice in two ways: through a computer model certified as unbiased and through an adviser compensated on a "level-fee" basis. Several other requirements must be satisfied, including disclosure of advisers' fees. DOL said the rules it is proposing contain guidance on the exemption's requirements, including computer model certification, and a non-mandatory model form advisers may use to satisfy the fee disclosure requirement. DOL also is proposing a class exemption that permits advisers to provide individualized advice to a worker after giving advice generated by using a computer model.
U.S. Rep. George Miller, D-Calif. and chairman of the House Education and Labor Committee, said the proposals are harmful. "For far too long, the rules of the financial services industry have been tilted in the interests of companies and consultants, not the millions of American workers who are deeply worried about saving enough for a secure retirement. Now, the Bush administration is proposing to further tip the scales towards special interests by opening the door to conflicts of interest among the very consultants purporting to offer unbiased investment advice, and potentially allowing companies to reap windfall profits at the expense of America's workers," Miller said. "With more and more workers having to dip into their nest eggs just to stay afloat in today's economy, there is a clear and urgent need to ensure that workers are getting the best deals possible on their 401(k) and other retirement plans. Instead, these proposals could make it much harder for workers to receive fair and honest advice when making key financial decisions about their futures. In its final months in office, this administration has developed a disgraceful pattern of sneaking in last-minute regulatory changes at the behest of special interests. At a time when Americans’ retirement accounts have already been pummeled by the nation's economic downturn, it is deeply extremely troubling that the department is trying to push through proposals that would further jeopardize workers' hard-earned savings. Indeed, the rules proposed by the administration today are nothing less than a boon for Wall Street and corporate executives, and I urge the Department to immediately withdraw these harmful proposals."
Miller is the author of the 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185), which would ensure full disclosure of fees charged on 401(k) plans so their owners could shop for the best investment advice, according to Miller. His committee approved H.R. 3185 by a 25-19 vote on April 16; it awaits action by the full House of Representatives.