Biden administration to propose rule to close retirement advice loopholes

Tuesday’s announcement is the latest effort by President Biden and his aides to address what they describe as “junk fees,” which create additional, sometimes unseen costs for Americans.
As part of that effort, the administration has previously announced actions to eliminate banking fees and hidden charges on cable bills, airline tickets and hotel bookings.

SPC Carl Davis
...""Today we're taking additional action to eliminate junk fees in retirement savings ...," Biden explained. "Many Americans spend their whole lives working, putting every dime left at the end of the month in their retirement account. After working hard for decades they can retire with dignity and a little bit of security."

The White House detailed the move by the Department of Labor to close loopholes that would require financial advisers to begin prioritizing the best interests of consumers over personal profits, which would minimize junk fees in a broad range of retirement products, the White House said in a statement.

As part of Biden's proposal, hidden fees paid to financial advisers for recommending investment products that don't always lead to greater benefits for consumers would face tougher regulations that aim to disrupt business as usual in the retirement investment sector.

"The action we're taking today, is, I believe, long overdue," said Biden. "If this rule is finalized as proposed, it's going to protect workers, and it's going to save workers that are saving for their retirement and save seniors from being exploited."

While the Securities and Exchange Commission mandates that advice for buying securities like mutual funds must prioritize the saver's best interest, these protections don't extend to insurance products like fixed index annuities, which are commonly suggested for retirement planning.

As a result, inadequate federal protections have created gaps in investment protection and incentives that have contributed to a 25% surge in fixed index annuity sales, the White House said.

Currently, federal law does not require one-time advice, like suggestions to move funds from a 401(k) into an IRA or annuity, to prioritize the consumer's best interests, affecting about 5 million Americans who pay fees to roll over their retirement money each year."

"The new Labor Department proposal would require financial advisers to provide retirement advice in the best interest of savers rather than in the interest of a firm pushing a specific investment product, something that the White House said can cost retirees billions of dollars annually.

The White House Council of Economic Advisers (CEA) said in a blog post published Tuesday that financial advisers must hew to a “fiduciary standard” to put their client’s interests above their own commissions when recommending investments."

I'm scratching my head on this one and will have to see the actual text of the proposal. Federal law* (the Employee Retirement Income Security Act of 1974) already requires that anyone who has control, or gives advice is subject to fiduciary responsibilities (side note: "Fiduciary" is a legal term and not a general statement).

I've heard complaints from some states about ERISA concerning flexibility in health insurance cases, but the only 'loophole' I know of is that the government exempted themselves and churches from having to follow ERISA - " ERISA does not cover plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans."
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* ERISA law - https://www.dol.gov/general/topic/retirement/erisa