The U.S. Labor Department unveiled a new 401k law on Tuesday that could drastically increase the pace of 401k rollovers in the United States, and retirement account providers are already scrambling to become compliant with the new regulations.
Labor Secretary Tom Perez said he believes the new law will be beneficial for investors and retirement account custodians alike, as it requires 401k and IRA providers to offer investments that are in their clients’ best interests. According to Perez, the “best interest” mandate will eliminate the suffering of many people who were steered toward high-fee investments. “The corrosive power of fine print and buried fees can eat away like a chronic disease at peoples’ savings,” Perez said.
Prior to last week, 401k brokers were simply required to offer investments that were “suitable” for investors, but the generic terminology allowed brokers to provide 401k investment options that had excessive fees on both ends. The Labor Department claims that it has been “working on” improving 401k laws for the last five years, but many believe the new law is meant to deter more lawsuits, of which there have already been a handful in 2015.
Financial analysts believe the new law could restrict the number of retirement account options available to investors. Retirement account companies like Bank of America, Charles Schwab, Fidelity and Morgan Stanley could decide to stop offering certain plans if they view the new law as over-regulation. “Instead of using a scalpel to make surgical changes to the rules,” said U.S. Chamber of Commerce managing director Alice Joe, “they brought out the snowplow.”
To find out if you could be affected by the new law, or to discuss your 401k rollover options with a non-commissioned adviser, contact us today and discover how easy it is to flex your financial muscle.