2023 1031 - DOL / EBSA - Fact Sheet: Retirement Security Proposed Rule and Proposed Amendments to Class Prohibited Transaction Exemptions for Investment Advice Fiduciaries

  • 2023 1031 - DOL / EBSA - Fact Sheet: Retirement Security Proposed Rule and Proposed Amendments to Class Prohibited Transaction Exemptions for Investment Advice Fiduciaries, U.S. Department of Labor, Employee Benefits Security Administration  ---  [BonkNote] ---  [link]  ---  7p
  • (p1) - That means that if a retirement investor receives investment advice from a firm or someone and compensates that person for providing that advice, the retirement investor has the right to expect that the person providing the advice is going to act in the investor's interest, and not in the advice provider's own interest.
  • (p2) - The Department’s current rule with respect to investment advice has not kept up with important changes in the marketplace. In 1975, when the rule was adopted, the most common type of retirement plan was a defined benefit pension plan, which was primarily managed by professional money managers and funded by employers, who shouldered the risk of poor investment performance. In the decades following publication of the current rule, 401(k)-type plans with individual accounts and IRAs have become the predominant way in which workers save for retirement.  
  • (p2) - In the decades following publication of the current rule, 401(k)-type plans with individual accounts and IRAs have become the predominant way in which workers save for retirement. In 401(k) plans and IRAs, individual retirement investors are typically responsible for making important investment decisions, and they, rather than their employers or plan officials, shoulder the risk of poor investment performance or inadequate savings.  Because most retirement investors are not investment experts, they rely upon the advice of investment professionals, such as brokers, insurance agents, and registered investment advisers on how to manage their retirement savings at some point in their lives. Too often, however, these investment professionals are not subject to ERISA’s fiduciary protections, including ERISA’s key obligations requiring fiduciaries to give advice that meets an expert standard of care (the duty of prudence), puts the customer first (the duty of loyalty), and avoids dangerous conflicts of interest (the prohibited transaction rules).
  • (p2) - Despite holding themselves out this way, however, the advice providers often are not treated as ERISA fiduciaries under the technical requirements of the 1975 rule, and may not be subject to the same duties to a person investing for retirement, even when the advice provider is giving such important advice as whether to liquidate a lifetime of retirement savings held in an ERISA-protected plan and transfer those savings to an annuity or other retirement investment and whether and where to roll over their retirement savings.
    • [Bonk: "Despite holding themselves out this way"
      • 2024 0215 - PIABA - Testimony - Joseph C. Peiffer, President, Public Investors Advocate Bar Association  ---  [BonkNote]  ---  30p
        • 2024 0215 - GOV (House) - Protecting American Savers and Retirees from DOL's Regulatory Overreach, Bob Good (R-VA)
    • [Bonk: "retirement savings" - Life Insurance?]
  • (p3) - The Department is proposing that a financial services provider would be an investment advice fiduciary under federal pension law if:
    • the provider states that they are acting as a fiduciary when making investment recommendations.
    • [Bonk:  2021 0602 - Doug Andrew - 3 Dimensional Wealth - What Is The Fiduciary Rule In Financial Services?  ---  [BonkNote]  ---  [YouTube-13:09]
      • [Bonk: LASER Fun = Indexed Universal Life Insurance]
      • 3-4 - 2008 - IRAs, 401ks - Lost money - 40%
        • "I could show you how to protect yourself to never lose again when the Market goes down."
      • Taxes - High or lower in the future
      • 5 - Convert money to tax-free
      • 5 - creating predictable income
      • 6 - Hidden Agenda of the DOL -
        • 7 - CFPB - Richard Cordray - 
      • 10 - I've never recommended people invest in a 401k or IRA - 
      • 11 - Invest in the LASER Fund - The LASER Fund will knock the socks off of a 401k or IRA
  • (p3) - This proposed fiduciary definition would apply to recommendations to roll over assets from a workplace retirement plan to an IRA if every element of the proposed fiduciary definition is satisfied. Amounts held in workplace retirement accounts often represent the largest savings an individual has, and financial services providers often have a strong economic incentive to recommend that investors roll money into one of their institutions’ IRAs or annuities. Applying the ERISA fiduciary standard in these transactions will provide significant protections for retirement investors.
    • [Bonk: No Mention of Rolling Over 401k or IRA to a Life Insurance Policy
  • (p3-4) -The Department has found that the 1975 rule defining a fiduciary doesn’t meet today’s retirement investors’ expectations.
    • Under the nearly 50-year-old rule, a financial services provider is an investment advice fiduciary only if, among other things, the advice is provided on a “regular basis” and there is a “a mutual agreement, arrangement, or understanding” that the advice will serve as “a primary basis for investment decisions.”
    • As a result, for example, advice that is provided on a one-time basis, such as many rollover recommendations, is typically not treated as fiduciary advice. Yet, one-time advice is often the most important advice the retirement investor will ever receive.
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