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The Department’s proposed rule would ensure that all investment professionals provide advice that is in retirement investors’ best interest and that any conflicts of interest do not taint their advice. We urge the Department to finalize this proposal without undue delay.

The post In Coalition with a Diverse Set of Groups and Individuals, CFA Supports the Department of Labor’s Retirement Security Proposal appeared first on Consumer Federation of America.

The proposal would honor retirement investors’ legitimate expectations when receiving advice from investment professionals who hold themselves out and function as trusted advice providers, providing retirement investors with the strong protections they need.

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“As we all know, retirement investing can be complicated, and many retirement investors turn to financial professionals for advice. Retirement investors reasonably expect and believe the financial experts they turn to will act in their best interests, and retirement investors trust and rely on the advice they receive.”

“You know what retirement investors don’t want or expect? To be steered to overpriced, suboptimal products or services that aren’t in their best interest by people who seek to evade their regulatory obligations and accountability, all so they can get a big payday.”

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Employers who sponsor workplace retirement plans generally want to make decisions that serve the best interests of their workers. And workers depend on their employer to make careful and sound decisions about what investment products to include in their retirement plan menu. Unfortunately, many employers do not have particular expertise in choosing plan investments. After all, most employers are small business owners, not financial professionals whose main job is setting up and administering retirement plans.

There is evidence, for example, that many employers have difficulty in evaluating the risks and rewards of mutual funds, which are commonly offered in retirement plans. This is the case even though mutual funds are transparent investments, which should enable an informed evaluation of the investment’s financial characteristics, including valuation, cost, risk, and reward. Recognizing their own limitations, many employers seek outside expertise to help them choose the best options for their plan. Employers reasonably believe and expect that the financial firms and professionals they turn to for help are legally required to and will serve the plan’s – and in turn, the workers who participate in the plan’s – best interest. Unfortunately, these financial firms and professionals are not typically legally required, under either ERISA or the securities laws, to recommend the best options for the retirement plans that they serve. Moreover, financial firms and professionals often have conflicts of interest to recommend the options that pay them the most money, rather than the options that are the best for the employer’s workers.

If employers are not up to the task of capably choosing the best mutual fund options for their workers, it likely would be near impossible for employers to make diligent and prudent decisions about whether and how to offer crypto assets to their workers. Given the fact that most employers are not crypto experts, it’s highly unlikely employers would have sufficient expertise about this market to make informed judgments about including crypto assets in their plans. Indeed, the unique features and risks of the crypto market would make it challenging for even those with specialized expertise in crypto markets to make diligent and prudent decisions about offering these assets to retirement savers. For example, these features and risks include:

• Crypto assets can be speculative and volatile investments, with prices that can swing wildly and crash without warning – this volatility can be particularly devastating for investors who are approaching retirement;
• It can be extraordinarily difficult, even for expert investors, to evaluate crypto assets and separate the facts from the hype;
• Crypto-related assets are not held like traditional assets in trust or custodial accounts, which can expose them to heightened risk of fraud, theft and loss – FTX’s recent failure illustrated these risks and the harms that can flow from them;
• Crypto-related assets raise valuation issues because they may not be subject to traditional, empirically-validated valuation methodologies;
• Crypto-related assets may be unregistered or otherwise offered by or through providers who are operating outside of or not complying with existing regulatory frameworks; and
• Crypto-related assets may be subject to additional regulation, which may evolve in unpredictable ways.

Given these particular issues and risks in crypto markets, it’s highly likely employers will rely even more heavily on financial firms and professionals when deciding whether and how to offer crypto assets to their workers. If employers work with a financial firm or professional that has financial incentives to recommend a particular crypto offering, it could be very difficult for employers to understand the nature or extent of those conflicts of interest, factor those conflicts of interest into their decision making, or independently assess the quality of the recommendations they receive.

Ultimately, employers will be legally responsible for the decision to offer crypto assets to their workers. If crypto assets crash and workers experience devastating losses, it is likely that employers will be left holding the bag, even if they were trying to do right by their workers and were merely relying on the expertise and judgment of financial professionals when deciding to offer crypto assets to their workers. In contrast, financial firms and their professionals who recommend crypto to be offered by the retirement plan, in all likelihood, would not be legally responsible for ensuring that the crypto offering that the plan offers is in the best interest of workers. This is because loopholes in the definition of who is a fiduciary under ERISA allow firms to evade their legal obligation to serve retirement savers’ best interest when providing investment advice. Moreover, to the extent that the crypto assets are not considered securities, any recommendations by financial professionals to individual retirement savers would not be covered by any securities law professional standards of conduct.

This unequal treatment of potential liability is neither right nor fair. The financial firms and professionals who offer and recommend crypto to retirement plans are also those best situated to perform the difficult and complex analysis necessary to determine whether it’s in workers’ best interest to offer that crypto asset to retirement savers, and to do so in a way that complies with the law. After all, they are the experts who do this for a living. They should not be immune from accountability for these recommendations and decisions, especially when the financial products they promote can threaten retirement savers’ financial security and foist unnecessary legal exposure onto employers who are trying to serve the best interests of their workers.

These new crypto offerings to retirement plans underscore the need for the Department of Labor to update its fiduciary rule by closing the loopholes in the current rule to ensure that the financial firms and professionals that offer and recommend crypto assets to retirement plans and workers are subject to strong fiduciary duties. These steps would help to ensure that any decisions to offer crypto assets to retirement savers would be made by those with sufficient expertise and ability to do so, and in a way that ensures such decisions are made with the care and soundness needed to guarantee they are truly in the best interest of retirement savers.

[i] See Alexander Osipovich and Caitlin Ostroff, TerraUSD Crash Led to Vanished Savings, Shattered Dreams, The Wall Street Journal, May 27, 2022, https://www.wsj.com/articles/terrausd-crash-led-to-vanished-savings-shattered-dreams-11653649201.

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In reality, the NAIC standard is a “best interest” in name only standard, allowing insurers and insurance professionals to falsely claim to be acting in consumers’ best interest when they are not actually required to do so. Instead of helping consumers, the NAIC standard will mislead consumers into expecting protections the rule does not actually provide.

The NAIC standard suffers from the following deficiencies:

• It does not actually impose a best interest standard. The NAIC standard merely requires that the producer have a reasonable basis to believe the recommended annuity “addresses the consumer’s financial situation, insurance needs and financial objectives.” That is not a best interest standard; it is simply a restatement of the obligation to make suitable recommendations. Calling it a best interest standard is misleading.
• It does not rein in the most harmful and pervasive conflicts of interest that taint annuity recommendations. The NAIC standard excludes all forms of cash and non-cash compensation from the definition of material conflict of interest. As a result, compensation practices at the heart of a whole host of recent life insurance and annuity sales scandals would be preserved.[i] This alone renders the NAIC standard much weaker than the SEC’s Regulation Best Interest standard of conduct for broker-dealers’ securities recommendations, which considers all forms of compensation in the definition of material conflict of interest.
• Its ban on certain sales contests and incentives is too narrowly drafted to promote real reform. The NAIC standard’s ban on time-limited, product-specific sales contests and incentives appears, at first glance, to be a major step toward eliminating some of the most anti-consumer practices common in the industry today. However, closer scrutiny reveals that it is so narrowly drafted that its only effect will likely be to force insurers to redesign, rather than eliminate, such practices. As a result, these harmful sales incentives will likely persist, just in a new form.
• It relies too heavily on disclosures that are poorly designed and unlikely to help consumers make informed decisions. In a number of key areas, the NAIC standard is satisfied through disclosure, but we know that disclosures of complex concepts and conflicts of interest are ineffective at informing or protecting consumers. As a result, the disclosures are likely to do more to shield insurers and producers from liability than to inform or protect consumers.
• It does not apply to recommendations of annuities inside 401(k)s or 403(b)s. As a result, retirement savers who receive advice to purchase annuities in these plans would not receive even the most minimal protections that the standard purports to provide. In addition, employers who sponsor and operate retirement plans for their employees could receive harmful advice to include annuities with suboptimal features in their plan for employees to purchase.

For these reasons, the NAIC standard will not protect retirement savers from the harms that result from low-quality, conflicted advice for retirement savers to purchase annuities. On the contrary, it will do more harm than good by misleading consumers into expecting protections the standard does not actually provide.

Only the DOL can protect retirement savers from harmful advice. ERISA’s fiduciary duty requires firms and professionals to comply with a real and meaningful best interest framework that ensures retirement investment advice is high-quality and not tainted by conflicts of interest. Unfortunately, there are several loopholes in the definition of who is a fiduciary under ERISA that allow insurers and insurance professionals to retirement investment advice without being held to the fiduciary duty appropriate to their role. Among other things, the rule requires the advice to be provided on a “regular basis.” Because retirement savers typically receive recommendations to purchase annuities on an infrequent basis, these recommendations typically do not meet the “regular basis” requirement. As a result, insurance firms and insurance professionals are not typically considered fiduciaries under ERISA when recommending the purchase of an annuity, even when that recommended purchase concerns all or substantially all of the retirement saver’s assets.

It is incumbent on the DOL to update its fiduciary duty to apply to insurers and insurance professionals who function as advisers to retirement savers. Closing the loopholes in the definition of who is a fiduciary under ERISA and requiring insurance firms and insurance professionals to act as fiduciaries when advising retirement savers about annuities will help to ensure that employers receive annuity advice that is in retirement savers’ best interest and is not tainted by conflicts of interest. As a result, retirement savers would receive recommendations to purchase higher-quality, lower-cost annuities that improve their retirement outcomes.

[i] See Office of Senator Elizabeth Warren, Villas, Castles, and Vacations: How Perks and Giveaways Create Conflicts of Interest in the Annuity Industry, October 2015, https://www.warren.senate.gov/files/documents/2015-10-27_Senator_Warren_Report_on_Annuity_Industry.pdf; Office of Senator Elizabeth Warren, Villas, Castles, and Vacations, 2017 Edition, Americans’ New Protections from Financial Adviser Kickbacks, High Fees, and Commissions are at Risk, February 2017, https://www.warren.senate.gov/files/documents/2017-2-3_Warren_DOL_Rule_Report.pdf; Greg Iacurci, Elder financial abuse grows more prevalent in annuity, life insurance products, InvestmentNews, May 16, 2016, https://www.investmentnews.com/elder-financial-abuse-grows-more-prevalent-in-annuity-life-insurance-products-66327

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The short answer is no, it has not. Even if Reg. BI is implemented and enforced in a way that maximizes its potential investor protections, the rule still leaves retirement savers susceptible to conflicted advice that is not in their best interests in a number of critical ways. Therefore, for the following reasons, it is still necessary to update the DOL fiduciary rule to ensure that all retirement savers receive investment advice that’s in their best interest.

1. BI generally doesn’t apply to recommendations made to retirement plans.

As sponsors of workplace retirement plans, employers are responsible for constructing the plan menu of investment options from which their workers select to build their portfolios. Because workers are often limited to the investment options that their employers choose for the plan menu, workers depend on their employers to make careful and sound decisions about those investment options. Unfortunately, many employers do not have particular expertise in choosing plan menus. After all, most employers are small businesses whose main job is not setting up and administering retirement plans. Because small to medium sized employers are not typically retirement plan experts, they often rely on the investment recommendations of financial firms and their professionals who provide services to their plan.[i]

However, Reg. BI only applies to recommendations made to an individual retail customer and does not apply to advice given to workplace retirement plans. Thus, a financial professional offering advice to an employer operating a retirement plan would be free to give costly, harmful advice to the employer, with no accountability under Reg. BI for doing so. As a result, employers, who receive conflicted advice would be more likely to offer more costly or poorer performing retirement plan options to their workers. Put simply, retirement savers that end up with higher-cost or lower-quality options would retire with less money than they otherwise would have or would have to work longer to hit their savings goals. And even small differences in costs or performance can add up over time. For example, a 1% annual reduction in returns, over the course of 35 years, could reduce the saver’s account balance at retirement by 28 percent. This could mean profound differences in financial stability and quality of life for retirees.

The SEC’s adopting release for Reg. BI specifically highlighted this gap in which retirement plans do not receive Reg. BI’s protections. The release suggested it expected the DOL to fill this gap by updating its fiduciary rule.[ii] We agree that the DOL must now ensure that employers receive the same high level of protections as retail investors when receiving investment recommendations from financial professionals.

2. BI doesn’t apply when a financial professional is recommending non-securities.

Many retirement savers who turn to financial professionals for investment advice receive advice to purchase investments that are not securities. However, Reg. BI only applies to recommendations involving securities, which means that Reg. BI doesn’t apply when financial professionals recommend non-securities products, including certain insurance and annuities products,[iii] commodities, real estate, or cryptocurrencies, to the extent those are not considered securities. As a result, retirement savers don’t receive Reg. BI’s protections when financial professionals recommend such products.

So, for example, if an insurance professional recommends that a retirement saver purchase a fixed indexed annuity, because a fixed indexed annuity is not regulated as a security, that recommendation would not be subject to Reg. BI. Therefore, none of the protections that Reg. BI provides would apply to this recommended transaction.

Similarly, if a financial professional recommended that a retirement saver purchase bitcoin in their retirement account, because bitcoin is not regulated as a security, that recommendation would not be subject to Reg. BI. Therefore, none of the protections that Reg. BI provides would apply to this recommended transaction.

Retirement savers should receive the same high level of protections regardless of the type of product they purchase, but these gaps leave retirement savers exposed to receiving harmful advice regarding non-securities products. The DOL is the only agency that can fill this gap for all products that are recommended to retirement savers.

***

Given that Reg. BI does not apply to all instances when retirement savers receive investment advice, and the profound negative impacts that bad advice can have on their savings, the need for DOL to update its fiduciary rule remains. All retirement savers should receive the protections and benefits of best interest advice, regardless of the capacity in which they receive investment advice or the kind of product they purchase.

[i] See, e.g., American Retirement Association, https://www.sec.gov/comments/s7-07-18/s70718-4767567-176840.pdf (“Broker-dealers routinely advise fiduciaries of small retirement plans concerning the investments that will be made available to participants under such plans. Like individual investors, most small plan business owners acting as retirement plan fiduciaries are not sophisticated investors. Most simply do not have retirement plan investment expertise.”).

[ii] See Regulation Best Interest: The Broker-Dealer Standard of Conduct, at footnote 254, https://bit.ly/3B1IgwW (“Although workplace retirement plans are not generally covered by the definition of retail customer in by Regulation Best Interest, based on preliminary discussions with DOL staff, we understand that the DOL is considering regulatory options in light of the Fifth Circuit’s decision vacating the DOL Fiduciary Rule, including the types of protections available to such workplace retirement plans and their representatives.”).

[iii] The standards that do apply to annuity recommendations, including the new model “best interest” standard adopted by the National Association of Insurance Commissioners, offer weaker investor protections than Reg BI. [Link to NAIC Fact Sheet]

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The cost and quality of investments offered by a plan can have a profound impact on a saver’s ability to grow their nest egg over the course of their career. If the investment options on the menu are high-cost or low-quality, workers would be limited to investing in options that are likely to underperform available alternatives, which may mean these workers retire with less money than they otherwise would have or that they need to work longer to hit their savings goals. Even small differences in costs or performance can add up over time. For example, a 1% annual reduction in returns, over the course of 35 years, could reduce the saver’s account balance at retirement by 28 percent.[i] This could mean the difference of tens of thousands of dollars lost.

Unfortunately, many employers do not have particular expertise in choosing plan menus. After all, most employers are small businesses whose main job is not setting up and administering retirement plans. And there is ample evidence that many employers create poorly constructed plan menus filled with high-cost, low-quality mutual funds that underperform. For example, a comprehensive study of retirement plan fees published in the Yale Law Journal examined the costs associated with more than 3,500 401(k) plans with more than $120 billion in assets,[ii] and looking at total plan costs, the authors found that investors paid, on average, 0.78% more in fees than participants in the lowest-cost plans did. Fees were so high in some plans that the excess costs incurred over time would consume the entire tax benefit of saving in a 401(k). Because fees cut into the ultimate returns investors receive, the unnecessarily high fees that many retirement savers in 401(k)s are paying are reducing their returns, undermining their ability to attain a secure and independent retirement.

So why do employers include suboptimal options in their plan menus? Because employers, especially small to medium sized employers, are not typically retirement plan experts, and they often rely on the investment recommendations of financial firms and their professionals who provide services to their plan.[iii] These financial firms and professionals are not typically legally required, under either ERISA or the securities laws, to recommend the best options for plans. Moreover, they often have conflicts of interest to recommend the options that pay them the most money, rather than the options that are the best for the employers’ workers. And it can be very difficult for employers to assess the nature or extent of these conflicts of interest, factor these conflicts of interest into their decision making, or independently assess the quality of the recommendations they receive.

Does ERISA address this problem?

No. Financial firms and their professionals who make investment recommendations to employers are not typically fiduciaries, with a legal obligation to act in the best interest of retirement savers. This is because there are several loopholes in a more than 45-year-old rule defining who is a fiduciary under ERISA by virtue of their providing retirement investment advice. Among other things, the rule requires the advice to be provided on a “regular basis.” Because recommendations to include certain investments in a plan lineup usually happen once, financial firms and their professionals are not considered fiduciaries. Similarly, the rule requires there to be a “mutual agreement” that the advice will form a “primary basis” for the investment decision. So, firms often include fine-print disclaimers in their materials stating that investors should not rely on the firm’s advice as a primary basis for the decision. As a result, financial firms and their professionals can act like they are providing advice in the retirement plan’s, and by extension workers’ best interest, without legally having to do so.

Closing these loopholes and requiring financial firms and their professionals to act as fiduciaries when advising plans will help to ensure that employers receive advice that is in their workers’ best interest and is not tainted by conflicts of interest. As a result, employers would receive recommendations to include higher-quality, lower-cost options in their retirement plan menus that improve retirement outcomes for their workers.

Does the SEC’s Regulation Best Interest address this problem?

No. Reg BI does not apply to brokers’ recommendations to workplace retirement plans. It only applies to recommendations to retail customers who seek to receive services primarily for personal, family, or household purposes. In adopting Reg BI, the SEC took the position that a workplace retirement plan would not meet this standard. In contrast, Reg BI does apply if a broker provides an investment recommendation to a plan participant (i.e. a 401(k) saver), since a 401(k) saver would meet this standard.[iv] Ironically, in the retirement plan context, this creates a lack of uniformity for brokers where they could be subject to different standards based on the advice recipient’s capacity and purpose for receiving investment recommendations. For example, if a small business employer in their capacity as plan sponsor receives a recommendation to include certain investments in their retirement plan, they would not receive Reg BI’s protections. However, if in the same conversation they receive a recommendation to invest their own 401(k) in certain investments in the plan, they would receive the protections of Reg. BI. This creates a lack of consistency for broker-dealer standards and is likely to lead to significant confusion for employers, who should not be expected to understand these fine distinctions.

[i] U.S. Department of Labor, A LOOK AT 401(K) PLAN FEES, https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/a-look-at-401k-plan-fees.pdf

[ii] Ian Ayres & Quinn Curtis, Beyond Diversification: The Pervasive Problem of Excessive Fees and “Dominated Funds” in 401(k) Plans, Yale Law Journal, March 2015, http://bit.ly/2nwVtFF.

[iii] See, e.g., ARA, https://www.sec.gov/comments/s7-07-18/s70718-4767567-176840.pdf (“Broker-dealers routinely advise fiduciaries of small retirement plans concerning the investments that will be made available to participants under such plans. Like individual investors, most small plan business owners acting as retirement plan fiduciaries are not sophisticated investors. Most simply do not have retirement plan investment expertise.”).

[iv] See, e.g., Rebecca Moore, How the SEC’s Reg BI Will Affect Retirement Plan Sponsors and Participants, Plan Sponsor (January 6, 2020), https://www.plansponsor.com/secs-reg-bi-will-affect-retirement-plan-sponsors-participants/.

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In particular, the letter commended the SEC for its boldness in seeking to root out harmful advisory conflicts of interest that are contrary to the public interest and the protection of investors, and encouraged the SEC to use its Dodd-Frank Section 913(g) authority more broadly, especially with regard to sales practices, conflicts of interest, and compensation schemes that harm retail investors.

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For 35 years Barbara Roper has served to protect consumers at the Consumer Federation of America.  “Her efforts to institutionalize a fiduciary responsibility in the financial marketplace is legendary and has served as the benchmark for those interested in a healthy, responsible and fair financial marketplace,” added Gillis.

As the Federation looks to find a permanent successor for Barbara, Mike Canning will be joining CFA in a consulting capacity as Investor Protection Consultant. Mike has recently announced that he will be leaving the North American Securities Administrators Association at the end of September to form The LXR Group, a public policy consulting firm.  He and Dylan Bruce, CFA’s Financial Services Counsel, will be continuing Barb’s work in protecting American Investors.

Contact: Jack Gillis, 202-939-1018

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The groups lay out three concerns with the DOL information letter: 1) It fails to give adequate consideration to the capacity of the typical plan sponsor, offering a defined contribution plan to its workers, to conduct the required analysis. 2) It fails to present a balanced presentation of the potential risks and rewards of investing in private funds. 3) It contemplates permitting funds with a private equity component in certain types of investments – including collective investment trusts (“CITs”) and target date funds – without adequately weighing the particular risks they could pose to defined contribution plan participants.

The groups urge DOL to withdraw the June 2020 information letter, or at least suspend its implementation, while it takes the following three actions:

• Revise the information letter to incorporate a more complete and balanced analysis of the potential risks and rewards of private investments in order to support more informed decision-making by defined contribution plan fiduciaries with regard to the appropriateness of these investments for their employees.
• Include a warning to plan fiduciaries that, where they lack the financial knowledge and sophistication to assess the appropriateness of the investments and provide the necessary oversight, they must either get disinterested advice from a fiduciary who has the requisite expertise or refrain from including the investments on the plan menu.
• Study developments since the information letter was released to determine the extent to which funds with private equity exposure have been, or are anticipated to be, added to plan menus, what process is being used in their selection, whether those funds are being designated as QDIAs, and how any CITs with private equity exposure are structured.

“We believe these steps are necessary to help ensure that defined contribution plan fiduciaries base any decisions about whether to add funds with private equity exposure to plan menus on a balanced consideration of the benefits and risks. It would also help arm the Department with the information it needs to ensure that retirement plan participants are not being put at undue risk,” the letter concludes.

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The groups added, however, that “Guidance can only take us so far.” The letter outlines the additional rulemaking that is needed to “close legal loopholes that would otherwise enable firms to evade appropriate application of the fiduciary duty, and to ensure that the duties set forth in the Exemption actually reflect and implement the strong fiduciary standard set forth in ERISA.” The Department has indicated that it is considering additional rulemaking along these lines.

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The PCAOB was created in the wake of the Enron and Worldcom accounting scandals to oversee the audits of public companies “in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.” The letter outlines a number of actions the PCAOB has taken in recent years that conflict with and undermine that mission, including replacing experienced staff with less qualified individuals, reducing its budget including for the critically important inspection function, dissolving its advisory boards, making policy changes without soliciting public comment, and deferring to industry-dominated groups in the standard-setting process, and operating in a non-transparent manner.

“Given the significant personnel changes, budget reductions and anti-regulatory activity at the PCAOB, there is considerable heavy lifting ahead to return the PCAOB’s focus to its primary mission of investor protection. Given their track record, we do not believe the current PCAOB Board members are up

to the task of re-focusing the PCAOB on its core mission because they are responsible for the dramatic shift away from what investors expect,” the former advisory group members wrote. “The circumstances surrounding the PCAOB compel the SEC to take immediate and assertive action to reverse the damage done over the past four years.”

They called on the new SEC Chair to act quickly to fill the current vacancy on the Board “with someone who is independent of auditing firms, highly competent and historically supportive of investors’ concerns relating to audit firm oversight and independence,” make that person chair, and reinstate the PCAOB’s advisory groups. “Together, these initial actions should begin to restore investors’ confidence in the public company audit process in the United States, however, more reforms will ultimately be needed,” they wrote.

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The bad news, Roper wrote, is that Regulation Best Interest, the Investment Advisers Act fiduciary guidance, and the Customer Relationship Summary all have serious deficiencies. “The good news is that we do not believe it will be necessary to scrap these rules and start from scratch in order to deliver the protections investors expect and deserve when they turn to financial professionals for help with their investments,” she added. “Despite their many flaws, these regulations can provide a framework on which to build a more robust regulatory approach.”

“For decades, the Commission has failed to live up to its central investor protection mission when it comes to the regulation of broker-dealers and investment advisers,” Roper concluded. “You have an opportunity to correct that failure, and we urge you to do so. It is, in CFA’s view, the most important step you can and should take to protect the interests of millions of financially unsophisticated individuals who turn to the markets to save for retirement or other important life goals and desperately need advice they can trust to navigate those decisions. CFA stands ready to do whatever we can to assist you in this effort.”

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“The main issue at stake here is opt-in vs. opt-out – what default works best to protect workers and retirees,” the groups wrote. “The notice-and-access rule adopted by DOL last summer abolishes the actual receipt standard, and replaces it with a rule structured to minimize the chances that workers and retirees will actually receive important disclosures. Under the new rule’s default, the plan’s obligations to furnish disclosures begins and ends with sending an email or text message to a consumer letting them know that a disclosure is available on a website. The entire onus of noticing the electronic alert, logging in and finding the document on the website, and printing it out for future documentation is shifted from the plan to the worker/retiree.

“Notice-and-access goes well beyond, and is far more anti-consumer than, simple electronic delivery of a document like receiving a PDF attachment in an email,” the letter continues. “Contrary to the body of research by behavioral economists to make defaults work to promote desired goals, the rule uses the force of inertia against the retirement security interests of consumers – “automatically enrolling” them in a disclosure regime that will discourage them from receiving, reading or preserving the documents.”

They called on DOL to “make it a priority to propose and adopt major revisions to this rule as soon as possible.”

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