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Today, 99% of employers in the United States are small businesses, responsible for 63% of new private sector jobs. To compete with larger companies and attract employees, small businesses need affordable retirement savings plans. They need more convenient, cost-effective ways to contribute to their employees’ retirement—not less. But a proposal by the Department of Labor (DOL) could actually limit small businesses’ access to retirement services or lock them out of the retirement market altogether.
DOL’s flawed fiduciary rule would require advisers who work with small businesses to establish retirement savings plans to be fiduciaries. Being a fiduciary creates new compliance hurdles and expands the types of communications that are considered “investment advice” subject to more regulation. That would restrict the advice that financial experts can share with small businesses and employees, raise costs, limit plan options, and perhaps even drive advisers out of this market.
The rule assumes that small businesses and investors aren’t sophisticated enough and need to be protected. Small businesses do deserve protections and have them under current law. What they need is more and better advice and fewer obstacles to providing retirement benefits. Armed with clear information and sound recommendations, they can and will make good decisions.
But DOL believes that the government knows best. The department wants to take over retirement plans because it thinks it can do a better job than the private sector. The truth is the DOL rule would end up hurting the small businesses and workers it is intended to protect. Imagine that—a government takeover that results in unintended consequences that actually leave people worse off.
In fact, this government overreach would make investing more confusing without actually fixing the problem DOL purports to solve. The fiduciary rule would create no fewer than six different standards for investment advice and services, adding new complexity. Moreover, it’s contradictory. An adviser marketing to a large retirement plan—one with 100 plan participants or more—would not be considered a fiduciary under the rule, but an adviser marketing to a small plan would be. Where’s the sense in that?
Currently, 12.3 million American investors hold less than $25,000 in their retirement accounts. Millions more should be saving, but they simply aren’t because no one is explaining to them how they can easily do so. The U.S. Chamber of Commerce is joining 310 bipartisan members of Congress and 460 small businesses, local chambers, and associations and urging DOL to fix the fiduciary rule. Without changes, the rule will make the problem worse—not solve it.