The Labor Department on Wednesday finalized a rule designed to ensure that those saving for retirement get investment advice that’s actually in their best interest—not the best interest of the adviser.
The final rule has been years in the making. The department received a great deal of feedback after it proposed a new rule last April, and “many changes were made to clarify, streamline, and simplify the proposed rule and proposed exemptions while still adhering to the North Star of an enforceable best interest standard for people receiving advice about their retirement savings,” Labor said.
For those who want to see how the new conflict-of-interest final rule, which requires those providing retirement investment advice to abide by a “fiduciary” standard, compares with the proposed rule, the department has provided a chart illustrating the changes.
According to a White House statement: “These rules will save affected middle class families tens of thousands of dollars for their retirement over a lifetime of savings. And they’ll level the playing field for the many good actors, so that retirement advisers will compete based on the quality of advice they give.”
Federal labor groups were in agreement. “Release of this rule is a major accomplishment that will help to safeguard the retirement savings of all Americans, including federal employees and retirees who are currently receiving poor advice regarding their Thrift Savings Plan holdings,” said Richard G. Thissen, national president of the National Active and Retired Federal Employees Association. “When you turn to an adviser for guidance on how to invest your hard-earned retirement savings, you should expect to receive advice that is in your best interest, not theirs.”
Previously, the best interest standard did not apply to advice given on a one-time basis, or advice regarding rollovers or investment in an individual retirement account.
NARFE had been concerned that some feds and retirees invested in low-fee TSP funds were being talked into moving their investments into similar funds with high administrative costs, benefiting unscrupulous advisers. “A 2013 survey of NARFE members revealed that many of them received poor advice about their TSP holdings and options for rollovers once retired,” Thissen noted.
While there still are some legitimate reasons to roll over TSP holdings into an IRA – such as withdrawal flexibility, higher tolerance for risk and investment in some asset types not available in the TSP funds – the TSP offers a lower cost for a well-diversified investment portfolio than is available in IRAs, NARFE notes.
“We call on every member of Congress to reject any efforts to block the implementation of this rule,” Thissen said.
Having trouble managing the work-life balance for yourself or your employees? The Office of Personnel Management last week announced a new 90-minute online course called “Introduction to Leave, Work-Life, and Workplace Flexibilities” that is available at no cost through OPM’s HR University.
The course aims to support President Obama’s commitment to creating a government that attracts and retains talented workers by offering the kind of programs more common in the private sector. The goal of the course is to “provide Federal employees and managers with a comprehensive overview of flexible workplace benefits and how to access them.”
Flexibility seems to be what top leaders at the Veterans Affairs Department are looking for. In case you missed our coverage earlier this week, VA Secretary Bob McDonald sent draft legislation to Capitol Hill that would raise the potential risks and rewards of serving at the department by allowing senior health care officials to earn higher compensation in exchange for fewer job protections. As Kellie Lunney reported:
The proposal would create a new personnel system under Title 38 for senior executives in health care leadership at the department, with new rules on hiring, setting pay and disciplining those accused of poor performance or misconduct. Those employees, who would include senior medical directors within the Veterans Health Administration and the Veterans Integrated Service Network, could receive compensation as determined by the secretary up to the president’s annual salary (currently $400,000) and would be subject to a new performance management system for determining bonuses and job ratings.
The proposal could be included in an omnibus legislative package unveiled this spring. Given the extraordinary push to streamline hiring and firing across the federal government, what happens at VA may be the beginning of things to come elsewhere in government.