FOR IMMEDIATE RELEASE
April 14, 2011
AARP SUPPORTS STRONGER TRANSPARENCY, ACCOUNTABILITY FOR RETIREMENT PLAN INVESTMENT ADVISOR OVERSIGHT
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.
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