The DoL’s Proposed Rule to Redefine “Fiduciary” is Baffling

By SBE Council at 1 June, 2015, 5:15 pm

…and Will Harm Small Businesses

By Karen Kerrigan-

Retirement plans are already expensive and complex enough for small businesses. The cost and complexity are barriers for small firms that wish to include these plans as part of employee benefits package. A proposed change by the Department of Labor (DoL) to the definition of “fiduciary” could make the plans more cost prohibitive, risky, and complex for small businesses. The new definition would effectively prohibit conversations that financial advisors have with business owners about their plans (for example, how to select and monitor a plan or updates on a plan’s performance.) Business owners and entrepreneurs would either have to do this type of work themselves (which means time and liability), or hire an independent consultant to do the work for them ( more costs).

In a letter to the DoL about the proposed changes, SBE Council president & CEO Karen Kerrigan urged the department to extend the comment period to allow for detailed analysis of the proposed rule so the small business community could more effectively assess its impact and provide informed feedback. Kerrigan noted that the rule will have unintended consequences for small businesses, which the DoL must consider before finalizing a new rule. (The DoL recently extended the comment period, but only for 15 days.) 

A survey last year by the U.S. Hispanic Chamber of Commerce found that the rule would cause small businesses to drop plans, or put them further out-of-reach for businesses considering retirement plans. SBE Council will continue to weigh in with the DoL and work with members of Congress from both parties who have expressed alarm and concern about the department’s overreach and harm the proposed change will cause.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.