What You Need to Know
- Labor is expected to propose updating the definition of fiduciary under ERISA, which could happen in December.
- It is widely expected that Labor will move closer to the vacated 2016 fiduciary rule, Mason and Lopez state.
- Millions of workers lost access to brokerage advice while the rule was in effect, according to the study.
As the Biden Labor Department is expected to propose a change to its fiduciary rule soon, a lawyer and a center-right advocacy group for Latinos warn that resurrecting the rejected 2016 rule would hurt low- and moderate-income savers.
A new study, released by Kent Mason, an attorney with Davis & Harman, a Washington-based law firm that represents big financial companies, and the Hispanic Leadership Fund — which sponsored the study — notes that “it is widely expected that DOL will be moving closer to the 2016 fiduciary rule that the Fifth Circuit Court of Appeals invalidated” in 2018.
Mason and the Hispanic Leadership Fund also question whether Labor can legally resurrect aspects of the rule that the court vacated.
Labor Secretary Marty Walsh said in mid-June that Labor plans to issue a new proposed rulemaking to update the definition of “fiduciary” under the Employee Retirement Income Security Act. That proposal could come by December.
What Your Peers Are Reading
Mario Lopez, president of the Hispanic Leadership Fund, said in a statement that “as working families across the country struggle to recover from the personal and financial toll of the COVID-19 pandemic, the Department of Labor is sending strong signals that it intends to reinstate many aspects of its 2016 fiduciary regulation. However well-intentioned, this was the wrong approach in 2016, and the consequences of repeating this mistake will be even graver this time for low and middle-income families.”
According to the research, reinstating the 2016 Labor fiduciary rule would reduce the accumulated retirement savings of 2.7 million individuals with incomes below $100,000 by approximately $140 billion over 10 years.
Lopez said reinstating the 2016 rule would have “the most adverse effects on Blacks and Hispanics — reducing their projected accumulated IRA savings by approximately 20% over 10 years — contributing to an approximately 20% increase in the wealth gap attributable to IRAs for these individuals.”
The just-released study maintains that it uses data and information “on the actual effects” of the 2016 rule as well as analysis of what is likely to happen if DOL resurrects significant portions of the 2016 rule.