Nationwide Exec to Senate: DOL Fiduciary Rule Would Hurt Workers
He cited institute survey data indicating that only 8% of consumers understand that a $100,000 nest egg might produce about $3,000 to $4,999 in annual lifetime income, and that 19% think it would produce $25,000 or more in annual lifetime income.
Stevenson agreed that expanding financial literacy programs is not enough. “In general,” he said, “we know that financial literacy doesn’t work.”
Programs that push workers toward saving more for retirement, while possibly letting them opt out, work much better, Stevenson said.
Unintended consequences: Witnesses and interest groups not included in the hearing emphasized that poorly designed retirement security bills may backfire.
The American Retirement Association pointed out that the government-provided matching contribution feature in S. 3102 would give employers, and especially small employers, a strong incentive to shut down their retirement plans.
Teresa Ghilarducci, an economics professor from the New School for Social Security, pointed out in her written testimony that one individual retirement account bill would encourage workers to participate in auto-IRA programs that would serve as vehicles for paying for homes and children’s college bills as well as for retirement expenses.
She said the “auto-IRA” bills are really “automatic individual liquidity account” bills.
“Liquidity is good,” Ghilarducci said. “Everyone needs emergency savings and savings to buy a house and fund a child’s life course, but, if retirement savings is used for all those purposes, there is no money left for retirement.”
Industry groups: Wayne Chopus, the president of the Insured Retirement Institute, and Paul Richman, IRI’s chief government and political affairs officer, sent in a letter opposing the DOL fiduciary definition effort.
“The proposed rule will make it harder, more expensive, and in many cases impossible for individuals to access professional financial guidance and lifetime income solutions,” Chopus and Richman wrote in the letter.
Susan Neely, president of the American Council of Life Insurers, wrote in defense of employers using group annuities to transfer pension obligation risk to insurers.
“Since the 2008 financial crisis, no insurance company has failed to make a life annuity payment to a plan participant following a pension risk transfer,” Neely wrote. “That track record is a function of the robust reserving and capital standards applied to insurers. Any additional Department of Labor guidance should recognize this strong solvency regime and not hinder employers’ efforts to purchase annuities to protect private pensions for their plan participants and beneficiaries.”
Eric Stevenson. Credit: Nationwide
