Responding to an apparent case of “good for thee, but not for me,” the Investment Company Institute (ICI) issued a strongly worded statement regarding the Department of Labor’s final rule providing a safe harbor from ERISA coverage for state run retirement plans.
“We are disappointed with the Department of Labor’s final rule, which exempts state-run retirement programs for private sector employees from vital consumer protections provided by ERISA,” said ICI President and CEO Paul Schott Stevens.
Stevens notes the final rule has removed conditions that would have prohibited states from imposing any restrictions on employee withdrawals from their individual retirement accounts (IRAs).
Calling it the “Hotel California” provision, he claims it effectively allows states to lock in employees and their savings, barring workers from moving their own money to private-sector IRAs that offer lower costs and a broader range of options.
He said ICI is reviewing the final text of the rule to see what other changes were made and if any effort was made to address the serious concerns ICI raised with the Department of Labor (DOL) in January.
Forcing the DOL to adhere to its own standards, Stevens added, “Oddly enough, this is the same Department of Labor that has just imposed a massive new set of ‘fiduciary’ regulations—projected to cost retirement savers $109 billion over the next 10 years—on private-sector retirement plans, IRAs, and their advisers, with little justification.”
“Yet the DOL now plans to turn a blind eye on the track record of mismanagement and abuse in state-run programs—whether public employee pension plans or municipal securities disclosure—and exempt new state plans from bedrock investor protections that the private sector has been subject to for 40 years.”
“Several states have already moved forward with state-run ‘Secure Choice’ style plans—programs that are fraught with risks for taxpayers and savers. Our extensive analysis of California’s proposal shows that it will not present a viable means of expanding meaningful retirement savings for private-sector workers and carries tremendous risks that could put taxpayers on the hook for a bailout.”
SEE ALSO:
- New Checklist to Aid with 401(k) Fiduciary Issues
- 5 Fiduciary Questions 401(k) Advisors Need To Answer
- What Will the Future 401k Industry Bring?
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
