Biden Administration Introduces Rules to Eliminate 'Junk Fees' in Retirement Plans, Aims to Increase Savings by Upholding Investors' Interests

Proposed rules target financial advisors' conflict of interests, aimed at closing loopholes in existing laws and potentially adding up to 20% more to retirement savings by prioritizing investor earnings over advisors' commissions.

The Biden administration has proposed new rules aimed at eliminating 'junk fees' in retirement plans, which often occur when financial advisers promote investments that yield lower returns for investors but higher profits for the firms. This can result in a conflict of interest that hinders American savers.
The new rules could potentially increase retirement savings by 0.2 percent to 1.2 percent per year, which could amount to 20 percent of retirement earnings in the long term. This change could potentially add hundreds of thousands of dollars to savers' retirement plans.
The proposed rules target areas such as rollovers from 401(k) plans to Individual Retirement Accounts (IRAs), non-security products like indexed annuities, and recommendations made to employers on investment funds to include in 401(k) plans.
Under the new rule, the Department of Labor can impose penalties on financial advisers or insurance brokers who do not act in the best interests of their clients. Failure to adhere to the proposed fiduciary responsibilities could lead to serious penalties, including the requirement to pay restitution and additional financial penalties.
Though various states have enacted certain regulations pertaining to such issues, the proposed rule aims to implement a uniform and consistent standard that protects all retirement investors regardless of their location. After the Department of Labor publishes the proposed rule, there will be a 60-day period for public comment.

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U.S. Department of Labor