The Department of Labor has decided to push forward yet again on a federal regulation that would severely hamper the ability of millions of Americans to save for their retirement.
Earlier this month the Department submitted a Notice of Proposed Rulemaking (NPRM). Based on the language. the proposed new rule substantially mirrors that of previous failed attempts.
In the wake of the Department’s 2016 rule fiasco, HLF published in-depth research to detail both the effects of the rule and analyze what would happen should the fiduciary rule be somehow reinstated.
Our study shows that reinstating the fiduciary rule would reduce the accumulated retirement savings of 2.7 million Americans with incomes below $100,000 by approximately $140 billion over 10 years. The losses would be even more dire for underserved communities. The fiduciary rule would result in a roughly 20% increase in the wealth gap for Black and Hispanic Americans—and that only considers accumulated IRA savings. Americans trying to save for their nest egg and build a fi8nancial future for their families stand to suffer financially.
In addition to the real-world harm done by the rule, their are significant legal issues at hand.
The Department has been at this for over eight years, and has repeatedly failed. The 2016 Fiduciary Rule was invalidated by a federal court, which is a rare occurrence given the typically high bar that set that has to be met due to a legal precedent that established something called Chevron Deference. In short, federal courts will give federal agencies leeway to establish and/or interpret regulations under their purview as long as the agency’s interpretation is “reasonable.”
Despite this, the Department of Labor in 2020 moved to resurrect part of the 2016 fiduciary rule, this time sneaking it in via a preamble to a different federal rule. That action has also been partially invalidated by a court challenge, and may be completely invalidated in a second court challenge in the Fifth Circuit.
HLF filed an Amicus brief in Federation of Americans for Consumer Choice v. U.S. Department of Labor in U.S. District Court. The case challenging the Department of Labor’s attempt to circumvent the U.S. Fifth Circuit Court of Appeals 2018 ruling that invalidated the 2016 fiduciary rule.
Stunningly, in their apparent zeal to target the financial services industry, the Department of Labor continues to ignore the financial harm to lower- and middle-income Americans, as well as the illegality of their actions.
