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Investors Would Gain From Revised Rules


April 14, 2011


Media Relations



Investors Would Gain From Revised Rules

Washington, DC – In a letter to the Department of Labor (DOL), AARP expressed support for efforts to expand important transparency and accountability measures for financial services relationships and activities that currently lack adequate protections for retirement plan investors.

 The letter, sent by AARP Legislative Counsel David Certner, is a follow-up to a DOL hearing in March that focused on these and other issues related to the department’s monitoring of the operations of private sector employee pension plans

Certner’s letter expressed the need to update current regulations affecting pension plans, which date back to the passage of the Employee Retirement Income Security Act (ERISA) in 1974, to address “actual and potential abuses pertaining to retirement plan investment advice” that have been identified by the department in the intervening years.

AARP strongly favors transparency in dealings between financial services providers on the one hand and pension plans and plan participants on the other.  This involves application of strict standards for those who provide investment advice to the plans, as well as heightened disclosure requirements such as disclosure of an advisor’s direct and indirect compensation from plan investments.  

A fiduciary duty is the highest duty of care and loyalty owed by one person to another.  This duty involves an obligation to act in the best interest of another party.  

“Comprehensive disclosure is necessary so that the plan sponsor is able to distinguish sales pitches from (investment) advice and to otherwise fulfill its fiduciary duties under ERISA,” Certner wrote.  

Current practices that require individuals to specifically request important information and then make investment decisions based on sophisticated knowledge will not protect participants, AARP points out.

AARP also supports wider adoption of “fiduciary duty” standards that require the service providers to act in the best interests of their clients, as opposed to their own financial interests.

Another point raised by AARP focused on the rollover of 40l(k)s and other defined contribution plan assets to IRAs, which typically occurs at the time of retirement.  Financial advisors are not uniformly regulated in connection with their advice to plan participants who are rolling over to IRAs.

“AARP urges the department to exercise its regulatory expertise to protect plan participants by requiring financial services professionals to disclose in a consistent and prominent manner, prior to the point of sale, any financial incentive they may have in the outcomes of such transactions and, since disclosure itself is insufficient, to subject any such investment advice to ERISA fiduciary standards,” Certner wrote.

For a copy of the full AARP letter to DOL, please contact AARP Media Relations at 202-434-2560.

About AARP

AARP is a nonprofit, nonpartisan organization with a membership that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world's largest-circulation magazine with over 35.1 million readers; AARP Bulletin, the go-to news source for AARP's millions of members and Americans 50+; AARP VIVA, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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