Protecting Workers’ Retirement Savings

For every worker, the promise of a just day’s pay for a hard day’s work, a safe return home at the end of the workday, the ability to retire with dignity. The promise of a good job that gives a family some breathing room.

In President Biden’s America, we are doing everything we can to make good on that promise. We’re investing in good jobs. We’re combating wage theft and illegal child labor. We’re expanding access to mental health care.

The Biden-Harris administration is also determined to help people save more of their hard-earned money. That includes cracking down on junk fees in banking, housing, health care and more.  

Recently, we’ve taken another important step.  

The Department of Labor has proposed a new standard to protect people’s retirement savings from conflicted retirement advice that hurts millions of families.

Think about this: Retirement funds are often the largest savings that people have. Little by little, paycheck by paycheck, and year after year, people add to these accounts over their entire working lives. So when individuals or companies, including small businesses, hire an adviser to help them make investment decisions regarding their retirement savings, they should be able to trust the advice they get.

Many advisers are trustworthy and put their client’s interests first. However, some only claim to do so, and then turn around and recommend investments that are in their own interest—at their client’s expense. For example, they recommend an investment simply because they’d receive a higher payday. This conflicted advice results in excessive fees—or junk fees—and lower returns.  

That chips away at Americans’ retirement savings. It undermines their trust in financial advisers, and it leaves workers unable to adequately prepare for retirement.  

Part of the problem is that the current rules haven’t kept up with how individuals save for retirement in a modern economy. The current rule was created nearly 50 years ago. IRAs were much less common back then—and 401(k)s didn’t even exist.

Back then, the most common type of retirement saving was through a defined benefit pension plan. Professional money managers oversaw these plans, and employers shouldered the risks when investments didn’t perform well. That’s no longer the norm.  

Individuals saving for retirement are often on their own to make retirement investment decisions. For example, savers might hire a financial professional for one-time investment advice to roll over a 401(k).  This is often the most important investment decision that retirement savers will ever make. And yet, under the current regulation, many investment advisers are not always obligated to work in savers’ best interest for those transactions.   A recommendation to trade $1,000 in stock would be subject to best interest standards, but a recommendation to roll one’s entire $300,000 401(k) life savings into an illiquid fixed indexed annuity (a type of life insurance with a steep withdrawal penalty) would not be subject to the best interest standard.

That’s simply unfair.

As President Biden has said, “folks are tired of being taken advantage of and being played for suckers.”

Our new Retirement Security Rule is designed to level the playing field. It would require that firms and advisers who are hired to give retirement investment advice adhere to high standards of care and loyalty to their clients.

This proposed rule also protects responsible financial advisers who are operating in a flawed system. Junk fees hurt them, too. They shouldn’t be competing against irresponsible advisers who hide behind loopholes and only claim to give trusted advice.

A single standard for all retirement advice is good for competition. It’s good for responsible financial advisers. It’s good for everyone with a retirement savings account.

It’s time to make sure that money goes where it belongs: in the pockets of workers and their families. It’s time to make sure working Americans get to enjoy the peace and security in retirement they deserve.  

To learn more about the proposed rule and leave a comment, please visit the Employee Benefits Security Administration’s website.

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Julie Su is the Acting Secretary of Labor.