Federal regulators are proposing new rules to protect retirement savings. As part of Obama’s stated plan to bolster the middle class, the Labor Department proposed changes to the Employee Retirement Income Security Act.
The rules are designed to protect retirees from investment brokers who put their own financial interests above their clients and eliminate conflicts of interest that encourage brokers to steer their clients into unsound investments.
Olivia Mitchell is director of the Pension Research Council at Wharton and she says these new rules will force brokers to be more transparent. “What that will mean is that if you do charge for your advice you have to disclose up front how you are charging and how that impacts the client.”
This is an issue now says Mitchell because there’s been a big shift away from pensions to individual retirement accounts. Regulators estimate that these new rules will save retirees $40 billion over the next 10 years. But that’s if they go into effect in their current form. As of today, the public and industry groups have 75 days to submit comments on the new rules to regulators.
The financial services industry has pushed back in the past on rules like these. In 2011 the labor department retracted its first proposal because the financial services industry thought the rules went too far.