Two values particularly mark this year’s 2014 MetLife Qualified Retirement Plan Barometer (QRPB) survey of Fortune 1000 retirement plan sponsors: income and simplicity.

The survey found that 57 percent of defined contribution (DC) plan sponsors that don’t include an income annuity are taking a “serious look” at lifetime income options, 34 percent have explored offering such options and 11 percent have conducted due diligence regarding companies that offer lifetime income options.

“DC-only plans sponsors are taking a serious look at lifetime income,” said David DeGeorge, vice president of life and income funding solutions for MetLife.

A new plan sponsor survey offers insights into the issues regarding retirement income adoption by workplace retirement plans. Service providers may find it instructive in anticipating and meeting plan needs.

More than a third of 212 plan sponsor respondents (37%) agree that solvency determination (i.e., evaluation of the annuity provider to ensure that its solvency is adequate to make all future payments to the annuitants(s)) is the most pressing issue that still needs to be addressed to ensure a workable safe harbor. According to the MetLife 2016 Lifetime Income Poll, this rises to 47% among those who are extremely or very familiar with the proposed amendments to the safe harbor.

Three-quarters (76%) of respondents say that in determining the adequacy of the solvency of a potential annuity provider for their defined contribution plan, they would prefer to be permitted to rely on certifications from the annuity provider based on the regulatory process carried out by a state insurance commissioner, rather than to conduct the solvency due diligence process themselves as part of their regular due diligence process for plan providers.

It is indeed sad that 40 percent of millennials favor the government banning speech that some deem offensive, according to a recent Pew poll. Even more distressing is that college students have plenty of company with members of other age groups and professions who want to shut down speech they disagree with.

Take speech about personal finance. This is an area where there would certainly seem to be room for a diversity of opinion, given the complexity of the topic and differences in individual financial goals and circumstances. That’s why there is no shortage of books and radio and television shows with differing viewpoints about financial planning. If you don’t subscribe to what Suze Orman or others have to say, you can always read or tune in Dave Ramsey and even call into his radio show for advice.

At least, that is, for now. A growing group of regulators and financial professionals are declaring that financial advice, even if it occurs in a public forum, should be suppressed if they deem the advice “incorrect.” And they see a pending rule from the Department of Labor (DOL) as the perfect vehicle to make Ramsey and others who offer financial tips to the public zip their lips or face government sanctions.

A recent article in LifeHealthPro, a prominent online trade journal for insurance agents and financial advisers, calls for Ramsey to “be regulated and to be held accountable” by the government for the opinions he gives to listeners. And it opines that the DOL’s proposed “fiduciary rule,” likely to be finalized in the next few weeks unless defunded by Congress in spending bills in December, would be the ideal tool with which to muzzle Ramsey and other personal finance broadcasters.

“This rule would define Dave as an advisor and thus … he would be regulated as a fiduciary,” Michael Markey, insurance agent and owner of Legacy Financial Network, argues in the LifeHealth Pro article he authored. After going through a litany of financial tips given by Ramsey to callers on which Markey holds differing views—such as what type of life insurance to purchase (and I take no position on who is right, as these are not public policy issues)—Markey hails the DOL rule as ushering a new era in which “entertainers like Dave Ramsey can no longer evade the pursuit of regulatory oversight.”

Is it the case that the rule would do this? Or is Markey’s interpretation just wishful thinking on the part of someone who—like many of the demonstrators on university campuses—wants to shut down opinions he disagrees with?

Markey is right that the DOL rule does expand massively—and in my belief, probably illegally—the definition of the term “fiduciary” under the Employee Retirement Income Security Act of 1974. As I have written in National Review:

In the 40 years since ERISA was first enacted, DOL regulations have for the most part strictly applied the term “fiduciary” to managers of defined-benefit plans and those who provided individualized investment advice on a regular basis, such as registered investment advisers. Under the new rule, financial professionals who provide even one-time guidance or appraisal of investments could find themselves classified as “fiduciaries.”

Moreover, as I have noted in that article and in many blogs, the term would apply to many financial professionals who do not even give advice, such as custodians of self-directed IRAs. Since those deemed “fiduciaries” would have to follow the mandate to only handle investments that adhere to what the government deems as savers’ “best interests,” individual choice of holdings in IRAs and 401(k)s would be sharply restricted.

But until I read Markey’s article in LifeHealthPro, I never thought the rule would cover those who offer free advice in a public forum. So I asked Kent Mason, partner at the law firm Davis & Harman who has testified before Congress on the ill effects of the fiduciary rule, for his view. Though Mason strongly disagrees with Markey that Ramsey and others should be shut up, he told me Markey was mostly right in his interpretation of the ability of the fiduciary rule to muzzle financial personalities answering portfolio questions from callers or audience members.

“Under the proposed regulation, investment advice from a radio host to a caller regarding the caller’s own investment issues would appear to be fiduciary advice if the advice addresses specific investments,” Mason said in an email. It doesn’t matter that Ramsey and other hosts aren’t compensated by listeners, he adds, as the DOL rule explicitly covers those who give investment advice and receive compensation “from any source.” Mason agreed with Markey that the compensation Ramsey receives from radio stations that carry his show and from book sales are enough to define Ramsey as a “fiduciary” under the rule.

Though the rule does contain an exemption for “recommendations made to the general public,” this wouldn’t protect Ramsey and other radio and television personalities if they gave specific answers to callers or audience members, both Mason and Markey argue. Similarly, Mason adds, while the main part of investment seminars would be exempt, “if during the seminar, someone from the audience asks a question about his or her situation and the speaker answers the question with respect to specific investments, that answer would be fiduciary advice.”

And given how the rule would work for others deemed “fiduciaries,” this means that anyone conducting a personal finance event—be it a radio or television show or seminar—would be subject to fines and/or lawsuits if he or she answered questions from audience members that the government deemed to be not in their “best interests.”

Hopefully, were a financial broadcaster ever sanctioned under this rule, the courts would strike down such punishment as a clear violation of the First Amendment guarantee of free speech. But Congress should not let it come to that, as it has a clear Constitutional obligation to defund the fiduciary rule before it is ever implemented.

Even without this flagrant First Amendment breach, there are more than enough concerns about this rule for Congress to defund it in upcoming legislation for fiscal year 2016 spending. A recent letter coordinated by the Competitive Enterprise Institute and signed by 33 conservative and free-market groups warns about many Americans losing their current brokers and a projected $80 billion cost to consumers from loss of access to financial advice. Ninety-six House Democrats also wrote DOL expressing concern that the fiduciary rule could limit access to retirement planning for poor and middle-class Americans.

So why not create a “safe space” for free speech and financial freedom?

This article first appeared on the Competitive Enterprise Institute’s Open Mark blog. CEI Research Associate Rahul Gangan contributed to this post.

It’s no secret that the U.S. has a saving problem. Most Americans are generally in the dark when it comes to how much to save and what investments to make. Ask them about the Department of Labor’s (DOL) proposed fiduciary rule and you’ll get an even blanker stare. But interestingly, the proposed rule could have a big impact on many who are saving for retirement.

When it comes to saving for retirement, U.S. households need a lot of handholding. Whether it is due to behavioral reasons such as lack of self-control or discipline, or simply a lack of financial knowledge, many of us save less than optimal amounts. Widely embraced policies, such as automatic enrollment and automatic contributions within 401(k) plans, have been successful in helping overcome some of these issues. But with changing times, there comes additional problems.
These days, it is very rare to hear someone say, “after 30 plus years with the same company, I am retiring.” In fact, according to the Bureau of Labor Statistics, for wage and salary workers 16 years and over, the median number of years with their current employer was 4.6 years in January 2014. For those aged 25 to 34, the median number of years was three. This could mean as many as 15 different jobs for this generation over their working life. Many millennials see frequent job changes as a tool for career improvement. However, continuous circulation between jobs also has implications for their retirement savings.

When they change jobs, employees have the option of leaving their funds with their old employer, transferring it to a plan with their new employer, rolling it into an IRA, or taking cash out. According to a Government Accountability Office (GAO) report, some plan sponsors do not want to retain separated employees’ accounts due to administrative burdens, costs and legal liabilities. The paperwork that is required to roll into a new account can be a burden for some employees. Many young workers take the path of least resistance and take the cash out, especially if their account balances are low. For example, according to a 2011 AON Hewitt survey, 42 percent of terminating employees took a cash distribution.

Financial advice becomes crucial at the point of rollover, and helps keep savings intact. Employees are less likely to take cash distributions if they are guided by financial advice. In fact, one company found that when terminating employees were contacted by phone by a licensed representative of a financial company, they were 3.2 times less likely to take a cash distribution compared to a similar worker who received only written communications. However, the DOL rule could inhibit communication between licensed representatives like broker-dealers and employees by requiring the broker-dealer to become a fiduciary. Inhibiting these communications will increase the likelihood that terminating employees will cash out their crucial retirement savings. A new report by the American Council for Capital Formation takes a close look at the impact of the DOL’s rule. By some calculations, a lack of educational communications to transitioning employees could result in an additional $20 to $32 billion of cash outs annually, decreasing the retirement savings of affected individuals by 20 to 40 percent.

This is just one of the issues flagged by the critics of the rule. There is also the impact on small businesses that rely on financial advice to set up their retirement plans. In fact, when a financial adviser is involved, a small business with 10 to 49 workers is 50 percent more likely to set up its own retirement plan. Smaller businesses are twice as likely to set up their own retirement plan with the help of financial advisers. However, the DOL rule could hinder this ability since the seller’s exception under the proposed rule (when sellers clearly communicate that they are selling a product and not advising) does not apply to individuals and small businesses. Many experts think that the lack of a clear seller’s exception will limit or discourage many small businesses from starting their own plans, negatively impacting the public policy goal of increasing access to retirement plans.

U.S. retirement markets are continuously evolving, with changing demographics as well changing economic realities. A comprehensive retirement policy designed to maintain growth in savings, expand coverage and prevent leakage during job changes is imperative for retirement security. The recently re-proposed DOL fiduciary rule, meant to protect the retirement savings of individuals, might not be in consumers’ best interests. The DOL rule should be more fully analyzed and adjustments made to ensure that low- and moderate income individuals are not priced out of personalized guidance and advice.

Wilber, Ph.D. is a senior economist at the American Council for Capital Formation, a nonprofit, nonpartisan organization advocating tax, energy and regulatory policies that facilitate saving and investment, economic growth and job creation.

Democratic lawmakers indicated Wednesday they will oppose legislation to halt a Labor Department rule that would change investment advice standards for retirement accounts. Even Democrats who backed a similar bill two years ago said at a House Financial Services Committee hearing they will not be on board this time. The legislation, written by Rep. Ann Wagner, R-Mo., would require the DOL to stop work on its proposal, which is designed to reduce conflicts of interest for brokers, until the Securities and Exchange Commission has acted on a similar rule for all retail investment advice.

Faced with an uprising from Democrats, Labor Secretary Thomas Perez on Friday pledged to make changes to the administration’s controversial proposal for regulating financial advisers. Perez declined to say what would be altered in the proposal or when it would be released, saying only that he is “confident” the revisions will improve it.


Pressed for details, Perez said that he “can’t really get specific on that because of where we are at in the rulemaking process.”
The comments, which Perez made during remarks at the Brookings Institution in Washington, comes after a heavy backlash against the regulatory effort from business groups, Republicans and some Democrats.

Perez has maintained for some time that he would make changes to the proposal after an open comment period.

Obama, Perez and progressives such as Sen. Elizabeth Warren (D-Mass.) argue that the regulations, known as fiduciary rules, are needed because too many financial advisors sell bad investment packages in order to turn a profit from financial institutions.

The proposed fiduciary rules, which are complex, would require financial advisers to disclose more information to their clients about the compensation they receive.

The business community is on the warpath against the regulations, arguing they would hurt low- and middle-income Americans by limiting their access to financial advice.

Those concerns are being amplified in the Democratic Party.

Last month, more than half of the Democrats in the House signed a letter pressing the administration to make changes to the proposal. They warned the rules as written were impractical and could raise costs for consumers.

Perez called the issue one of his “top priorities” and said that he’s “probably done more outreach [on the fiduciary proposal] than any other issue at the agency.”

Appropriations bills in both the House and Senate are seeking to block Perez from implementing the regulations.

– This story was updated on Oct. 18.

The Obama administration’s plan to make sure that savers get the best advice on retirement products will instead hurt the middle class, and insurers need to intensify efforts against the proposal, the head of an industry group said.

“This is government at its worst,” Dirk Kempthorne, chief executive officer of the American Council of Life Insurers, said Monday at the group’s annual conference in Chicago.

Stifel Financial Corp. and Voya Financial Inc. are among companies that have faulted the proposal as difficult to implement and counterproductive. MetLife Inc. CEO Steve Kandarian said it could discourage companies from providing financial advice, except to wealthy clients who pay substantial fees.

The Department of Labor says new rules are needed so that savers won’t be pushed into high-fee products by brokers who make commissions on the sales from banks or insurers. Given the government commitment to the plan, opponents should send letters and share their objections with lawmakers, said Kempthorne, a former Republican senator from Idaho.

“We face an uphill battle to fix the rule,” he said.

Deanna Mulligan, CEO of Guardian Life Insurance Co. of America, said that “our integrity is under attack” in the industry by people who aren’t convinced that companies do what’s best for the customers. She said insurers need to stress their role in helping families prepare for retirement.

“What we do is, in some part, a substitute for government dependence,” she said at the conference.

More than 100 House Republicans told Labor Secretary Thomas Perez in an Oct. 6 letter to tell them by Oct. 21 how the Department of Labor will make “substantial changes” to “shortcomings” in its fiduciary plan, but to also allow stakeholders to view those changes before issuing a final rule.

The letter, sent by Reps. Mike Kelly, R-Pa., and Sam Johnson, R-Texas, both members of the House Ways and Means Committee, told Perez that “given the scope of the necessary changes and the significant consequences for retirement savers — especially those with smaller account balances — we strongly urge you to provide stakeholders with an opportunity to review the changes” before the rule advances and is submitted to the Office of Management and Budget.

The lawmakers said that while they support a best interest standard, they have “serious reservations that the details of the current proposal will severely disrupt the availability of affordable financial education and investment advice while also restricting product choice and retirement security for many American families.”

Three former heads of the Securities and Exchange Commission said Tuesday that the SEC should move on a fiduciary rule, with former SEC chief Harvey Pitt predicting that while DOL may be “ahead now” in its fiduciary rulemaking, the department may not “finish ahead.”

Once DOL proposes its rule, Pitt said, “there will be a lot of behind-the-scene discourse to try to accommodate the disparities that exist” between DOL and SEC in terms of fiduciary regulation. “We saw that in the swaps regulation with the SEC and the CFTC; they regulate the exact same conduct differently.”

The comment period on DOL’s rule to amend the definition of fiduciary under the Employee Retirement Income Security Act ended on Sept. 24. Opponents to DOL’s rule are taking issue with the fact that Perez has stated DOL will issue a final rule after considering the comments received.


MetLife Inc. said its dual roles of offering retirement products and advising customers are threatened by a U.S. Labor Department proposal that was designed to make sure savers’ interests are put first.

“Without substantial modifications, the proposal could force companies such as MetLife to choose between manufacturing individual annuities and distributing,” Chief Executive Officer Steve Kandarian said on a conference call Thursday.

President Barack Obama’s administration says new rules are needed so that savers won’t be pushed into high-fee products by brokers who make commissions from banks or insurers. Kandarian previously likened the plan to forcing a Chevrolet dealership to guide potential customers to Ford vehicles.

“The proposed rule effectively makes it a conflict of interest to sell your own products,” Kandarian said Thursday. “It is unclear what public policy goal is served by making it more difficult for companies to provide guaranteed retirement income to consumers.”

Other providers of retirement products have also faulted the proposal, with Stifel Financial Corp. CEO Ron Kruszewski calling it “almost unworkable” and Voya Financial Inc. saying it would jeopardize retirement income by by making it harder to get advice.

Middle Class

Kandarian, 63, said the rule would punish most savers. The only exception, he said, would be the wealthy because their holdings generate enough fees to make it worthwhile to provide them investment advice.

“Assets of middle-income investors are unlikely to generate fees sufficient to offset” the higher costs of offering advice under the proposal, he said. “Consequently, those consumers could find it difficult, if not impossible, to receive face-to-face investment advice.”

MetLife slipped 1.9 percent to $56.13 at 12:54 p.m. in New York trading. The company, which is the largest U.S. life insurer, has advanced 3.8 percent this year, compared with the 5.2 percent gain of the Standard & Poor’s 500 Insurance Index.

The insurer’s executives were asked on the call whether rule changes would push the company to change pay tied to retirement products.

“We have already changed our compensation policies a couple of years ago to, I would say, equalize comp between proprietary and non-proprietary annuities for our producers,” said William Wheeler, head of the Americas region. “That said, we might still have to make other compensation adjustments to our producers” based on the eventual rules.

If you’re a Democratic policy maker worried about retirement savings for the little guy, would you deny millions of small savers access to financial advisers in ways that could cost them $80 billion in the next market downturn? Would you ask working families to pay more to keep the adviser they have?

The obvious answer to both is no. But the White House and the Labor Department have teamed up to propose a new “fiduciary rule” on brokers and advisers serving individual retirement account investors, which would produce precisely these unintended consequences.