Speeches & Floor Statements

Floor Speech: Fiduciary Rule

Posted on May 24, 2016

The Congressional Review Act resolution of disapproval we're debating is about protecting the right of ordinary Americans to retire. That's what it's about. We're trying to stop the labor department's so-called “fiduciary rule” which will restrict access to basic retirement advice for all but the wealthiest Americans. It will force ordinary Americans to go it alone, to try to make the best guess they can about how to manage their money for retirement. Here's how:

The administration's new rule updates the rules and requirements for retirement advisors now requiring them to act as “fiduciaries.” That, like many of this administration's rules sounds helpful but in practice is going to cause great harm. The administration has created a new legal liability, and that liability is so risky that advisors will take on that liability and risk only if they're advising individuals with big assets, so that the potential return outweighs the risk.

In other words, good retirement advice will be available only to the rich under this rule. We know this because a similar rule was implemented in the United Kingdom in 2013. Let's look at what happened when a similar rule was implemented in the United Kingdom. The result was that people with smaller savings accounts lost access to retirement advice. Many firms quit providing face-to-face advice for small accounts. A quarter of all small firms were forced to close shop all together. The United Kingdom's four largest banks have all raised the minimum assets levels for clients to receive advice: $80,000 American dollars at one bank, $160,000 at another, $355,000 at a third, $800,000 at a fourth due to the new rule.

So, to access retirement accounts at the United Kingdom's biggest banks, you have to have at least $80,000 in your account. So what would that look like here in the United States? 77% of 401(k) balances in the United States are below $80,000, the lowest threshold. 99.2% of the 401(k) balances in the United States are below the $800,000 threshold. So if United States banks respond like United Kingdom's banks did to this rule, we might find that less than 1% of Americans will be rich enough to receive retirement advice at one of our nation's largest banks. We should call this the ‘only the rich retire’ rule.

Americans with smaller retirement savings or Americans who are just getting started out saving for retirement are at the greatest risk for losing access to affordable retirement advice. Unless you have at least $80,000, you may not able to get advice. Your small account won't be worth the liability to the advisor. This rule will force low- to middle-income Americans to invest on their own without advice. This means Americans may not save at all or may make poor decisions at critical times. Younger Americans, minorities and women are the most likely to be hurt. 95% of Americans between the ages of 25 and 34 with 401(k)'s have balances under $80,000. 75% of black households, 80% of Latino households ages 25 to 64 have less than $10,000 in retirement savings compared with 50% of white households.

The median I.R.A. balance is $25,969 for American women compared to $81,700 for men. Even left-leaning economists estimate this rule would cost middle class Americans as much as $80 billion in lost savings. The late Chet Atkins, the prominent guitarist in Nashville, used to say “you have to be mighty careful where you aim because you're likely to get there.”

Retirement is all about planning. If you don't know how to plan, it's going to be pretty hard to retire. In Chet Atkins' terms, if you're not able to make a plan, it's hard to retire. That's where you're likely to get. Retirement planning is complicated. Our tax system is a mess. Most working Americans don't have the time to learn about all the financial vehicles available to them to save. And understanding exactly what steps they must take to have enough money to enjoy life when they end their careers.

This rule comes at a time when many Americans are beginning to save money again after surviving the worst recession since the Great Depression and the slowest recovery since the Great Depression. This rule was allegedly to protect individuals from misleading investment advice, but in practice, the new rule will make retirement planning unaffordable for lower and middle-income Americans whose accounts are not valuable enough for advisors to take on the new legal liability created by this rule.

One of the most radical, out of touch aspects of the Obama administration's agenda has been its labor policies. Take the overtime rule. At colleges this rule could force students to pay more tuition. One Tennessee college estimates $850 more per student. The president is running around talking about keeping college costs down. Why is his administration coming out with a rule that would raise tuition $850 per student? At workplaces, this overtime rule could result in workers having their hours and benefits cut, fewer opportunities for advancement, less flexibility and less control over their work arrangements.

Then there is the joint employer decision. Through this National Labor Relations Board decision, the administration is trying to steal the American dream from owners of the nation's 780,000 franchise businesses and from millions of contractors, by destroying the franchise model that has helped so many Americans go from cashier to business owner.

Then there is Obamacare. The health care law defined full-time work as only 30 hours. That sounds more like France than the United States. It has forced employers to cut their workers' hours or reduce hiring altogether in order to escape Obamacare’s mandate and its unaffordable penalties.

Then there are micro-unions. This labor board decision will allow collective bargaining units made up of subsets of employees within the same company. It will divide workplaces. It will make it harder and more expensive for employers to manage their workplace and do business. As the United States Chamber of Commerce noted recently, the overtime regulation joins the recently finalized fiduciary rule which will reduce the ability of small businesses to provide retirement benefits. It joins the Equal Employment Opportunity Commission's proposed EEO-1 form that will explode the burden on employers for reporting compensation by micro-demographics. It will join OSHA's just-released injury reporting regulation that will result in sensitive employer data being posted on the internet for use by unions and trial lawyers. And it will join the Department of Labor's recently issued persuader regulations, that is intended to chill the ability of employers to retain competent labor counsel during union organizing campaigns.

This retirement rule is only the most recent in a series of actions that make it much harder for employers to add jobs and much harder for workers to climb the economic ladder of opportunity.