April is tax season. That means Uncle Sam dips into our pockets and takes far more than his fair share. But the Department of Labor just made it even more difficult for workers to get ahead.
We can’t all afford a personal financial advisor to build a retirement plan and savings strategy for our family. Various financial service firms and their agents, such as State Farm, offer services and products to help low- and moderate-income investors make the best financial decisions.
The bottom line? This rule drastically narrows the access Americans have to retirement advice. It hurts middle class families trying to save for a secure retirement and it penalizes small businesses that want to provide benefits for their employees.
This new rule change will significantly raise legal and compliance costs, hindering companies such as State Farm from providing these services to small businesses and customers. Ultimately, this will drastically narrow who can give you financial advice.
How? Let’s take just one element of the rule. If you leave an employer to start your own business or begin a new job, this rule restricts your previous employer from providing assistance as you roll over your existing 401(k) plan to an IRA or a new 401(k) program. Withdrawing from a retirement account has significant tax penalties and rolling these funds into an IRA can be beneficial to the employee over the long run.
That’s not all. This rule targets small businesses trying to offer their employees a retirement program, like a 401(k). They will face more challenges in getting good advice on what products they can offer because brokers and agents will have to risk steep legal liability.
Ultimately, this rule widens the chasm between those who can afford to hire expensive advisors to navigate the legal world of finance and those who cannot.
What’s the kicker? While private companies face their biggest mandated overhaul in a decade, the Labor Department has already proposed waivers so new, state-run retirement plans don’t have the same regulatory burden as private employers.
House Republicans are fighting to roll back this rule. Last October the House passed H.R. 1090 with my support, which would prohibit the labor secretary from redefining a “fiduciary” until the Securities and Exchange Commission acts first. We should be making it easier — not harder — for Americans to save for retirement.