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During the depths of the economic recession in 2008, Rachel Doba made a bold move in order to pursue her entrepreneurial vision. Strapped for capital, she cashed out her 401(k) retirement plan in order to gather the funding she needed to start a new company.
“Rebuilding the original balance has been a bigger challenge than I anticipated,” Doba, president of DB Engineering, a civil engineering firm based in Indianapolis, told lawmakers during a congressional hearing in the nation’s capital on Wednesday. “As such, my company’s retirement benefits are just as critical to me as they are to my employees, and I have every incentive to ensure that we are getting great benefits at a fair price.”
Unfortunately, the Department of Labor is attempting to make that much more difficult.
This fall, the agency proposed a new retirement rule - known inside the Beltway as the fiduciary rule - that would restrict the advice financial experts can share with small business owners and employees while at the same time severely limiting the types of retirement plans offered to those small companies. Ultimately, experts believe the new rule would raise costs for small companies, to the point where offering retirement benefits may not be possible.
“I do not understand the reasoning behind this proposal,” Doba told members of the House Education and Workforce Committee’s subpanel on health, employment, labor and pensions. “I have a trusted advisor that has provided great service, which has allowed me to provide retirement security for my employees and me. This proposal puts all of that in jeopardy.”
Doba explained that, by limiting her plan options, the rule threatens to reduce competition. In turn, that will “drive up costs for my small business, as well as the costs that will be passed onto my employees and me as participants in the plan,” she told the subcommittee.
Doba isn’t alone. Led by the U.S. Chamber, a group small business owners from around the country traveled to Washington and descended on Capitol Hill two weeks ago to discuss the rule’s potential consequences and encourage their representatives in Congress to push back against the proposal. Several others testified at hearings this summer about the potentially crippling consequences the rules would have on small businesses.
“This rule would restrict the advice that financial experts can share with small business owners and employees, raise costs, limit plan options, and perhaps even drive advisors out of this market,” U.S. Chamber President and CEO Tom Donohue said at an event coinciding with the Hill visits in November. "The truth is the Department of Labor rule would end up hurting the small businesses and workers it is intended to protect.”
Doba reiterated that same message at this week’s hearing.
“We are very concerned that the proposal will not achieve the department’s goals of better protecting workers and retirees, but will instead make it harder for small business employers and employees to access financial advice and to increase retirement savings,” she said. “The, unintended consequences will have substantial negative repercussions on my employees, as well as the employees of many other small businesses.”