Opinion Pieces

Don’t Leave Working Americans in the Dark on Retirement Savings

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Washington, August 14, 2015 | comments

Having owned and operated community pharmacies for nearly thirty years, I take pride in having provided my employees with the tools they needed to achieve financial independence. One of the most important tools in this effort were retirement investment plans so they could save to retire comfortably.

Unfortunately the Obama administration is now taking steps threatening the ability for small businesses to provide their employees with this vital resource.  If the administration gets its way, many more employees will not have a retirement plan at work and will have to save on their own  by either paying unreasonable fees or getting their retirement advice online without one-on-one assistance.  Experts estimate Americans stand to lose $80 billion in retirement savings annually due to the rule.

The United States Department of Labor’s new regulation, known as the “fiduciary standard,” would leave many unable to save for retirement at all. It would prohibit any business with fewer than 100 employees from receiving investment information about its retirement plan options.  In doing so, it would render small businesses like the pharmacies I owned unable to help their employees plan and save for retirement.

Middle class families would be hit the hardest by this “fiduciary standard.”  By treating local financial representatives as fiduciaries, the proposed more than 400-page regulation would expand the Department of Labor’s overly-burdensome and complex pension rules to cover Individual Retirement Accounts (IRAs) used by most middle class savers.  The rule change ignores the fact that these accounts are already heavily regulated by existing securities laws.

By far the scariest consequence of the DOL regulation is how it would curtail access to retirement education for middle class savers and potential savers who would benefit most from one-on-one advice.  The regulation limits them to “managed accounts” where financial services firms charge a fee, usually around one percent, based on an account’s assets under management. Buy and hold or long-term savers would pay significantly more over the long run if charged an annual asset-based fee.

Moreover, the minimum balance required for managed accounts at most firms is at least $25,000 if not much, much more.  That would cut off as many as 20 million Americans whose accounts do not reach that threshold from receiving face-to-face retirement advice.

This misguided change would severely restrict access to information and education about retirement options for those already struggling to save.  Those with less than $25,000 to save and invest, would likely be forced to pay an hourly fee of $250-$500 for retirement advice, search blindly for advice on the Internet, or forgo saving at all.

Anyone who thinks the average middle class saver – who has less than $250 per month to save for retirement – is going to shell out $250 an hour or more for someone to give them retirement advice is out of their minds.  And if you think getting sound retirement advice online is easy, just Google it and see the many ads that overtake your screen.

This is a classic case of federal government stepping in the way of a Main Street success story with a “Washington bureaucrats know best” mentality.  Having had the privilege of helping my employees at the pharmacies save for their retirement, I know what cutting off this resource could mean for them and their families.

Like many small business owners, I consider my employees part of my family.  That’s why I am so committed to working with Chairman John Kline (R-Minn.) and the House Education and the Workforce Committee to block this rule change so they – and millions of working Americans like them – aren’t left in the dark when it comes to retirement savings.

Carter has represented Georgia’s 1st Congressional District since 2015. He sits on the Education and the Workforce; the Homeland Security; and the Oversight and Government Reform committees.

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