We know not enough Americans are adequately prepared for retirement. Before the pandemic, one-third of Americans had saved only $25,000 or less for retirement. And the problem has only intensified during the pandemic. Half of working adults said the pandemic will make it harder to achieve long-term financial goals and 27 percent of Americans decreased or stopped saving towards retirement in 2020.
But if that weren’t troubling enough, consider this: the U.S. Department of Labor (DOL) may soon resurrect a discredited regulation from 2016 that made it harder for lower and middle-income Americans to gain financial security. This would be bad public policy.
Before it was vacated by the Fifth Circuit Court of Appeals, the DOL’s fiduciary-only regulation restricted access to professional guidance that retirement savers with low and moderate means want and need.
As noted in a study released this week by the Hispanic Leadership Fund, more than half of financial institutions in the study reported limiting or eliminating access to brokerage advice for smaller retirement accounts, affecting approximately 10.2 million accounts and $900 billion in savings.
Furthermore, the study projected if the fiduciary-only regulation were reinstated, it would reduce the accumulated retirement savings of 2.7 million individuals with incomes below $100,000 by approximately $140 billion over 10 years. It would disproportionately harm Black and Hispanic Americans by increasing the wealth gap in accumulated IRA savings by approximately 20%.
Reinstating a fiduciary-only regulation would be devastating. It’s also completely unnecessary.
The Securities and Exchange Commission’s (SEC) Regulation Best Interest (Reg BI) and the National Association of Insurance Commissioners’ (NAIC) revised best interest model regulation on annuity transactions raise the standards for sales professionals while ensuring savers retain access to, and information about, annuities. So far 16 states have adopted rules or laws patterned after the NAIC model.
ACLI actively supports these initiatives.
All retirement savers deserve and expect fair treatment. They also deserve to be free to choose among fiduciary and transaction-based services.
Financial protections shouldn’t limit financial options. The DOL must not make it harder for middle-income and underserved Americans to achieve financial security by insisting on a fiduciary-only approach.
Susan K. Neely is the President and CEO of the American Council of Life Insurers (ACLI), the nation’s leading trade association determined to help families live better lives by achieving financial security and certainty. As president and CEO, Neely drives public policy and advocacy on behalf of ACLI’s member companies that represent 95 percent of industry assets and serve 90 million families.