Lawmakers took a hard look Tuesday at rules adopted in the final days of the Bush administration on how millions of Americans with 401(k) and individual retirement accounts get guidance on investing for retirement.
Members of a congressional panel said they wanted to ensure that retirement account holders have access to unbiased investment advice — an issue that's all the more important since stock market declines drained billions from 401(k) accounts, which cover more than half of America's full-time work force.
A House pensions subcommittee heard testimony on the Labor Department rules aimed at making pension plan advice more accessible to a rising number of people who need it. The rules outline how advice can be rendered, when and how pension fund advisers must disclose conflicts of interest and when they are not required to do so.
Under the rules, which President Barack Obama put on hold for further review, a worker can get retirement investment advice from a financial adviser who uses a computer model that meets requirements for objectivity. A different aspect of the rules would require financial advisers to be paid the same no matter which products they recommend — and disclose any conflicts of interests they have if a worker chooses to participate in a certain plan.
Supporters say the complex rules have adequate safeguards to protect the consumer from biased advice given by advisers who have a financial incentive to recommend certain investment products. But some Democrats contend they could allow financial advisers to steer clients to investment products that maximize the advisers' profits rather than workers' retirement security.
"If workers receive investment advice, it should be independent and free of conflicts of interest," said Rep. Rob Andrews, D-N.J., chairman of the House Subcommittee on Health, Education, Labor and Pensions, which conducted the hearing. "This last-minute Bush administration special interest payback had the potential to further drain Americans' hard-earned retirement savings."