Biden administration to crack down on ‘junk fees’ in retirement plans
The Biden administration is cracking down on so-called «junk fees» in retirement accounts.
The U.S. Department of Labor on Tuesday proposed a rule that would raise the bar for financial advisors, brokers and insurance agents who give investment advice to Americans saving in 401(k) plans, individual retirement accounts and other types of savings vehicles.
Specifically, the proposal seeks to close «loopholes» in current law that sometimes allow trusted advisors to recommend investments that aren't in a saver's best interest but may pay the advisor a higher commission, administration officials said.
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The rule targets financial advice in three areas: rollovers from 401(k) plans to IRAs; «non-securities» products like indexed annuities and commodities like gold, which generally aren't regulated by the Securities and Exchange Commission; and recommendations made to employers on which investment funds to offer in 401(k) plans, according to the White House.
There's a 60-day period for the public to submit comments on the proposal.
The proposal, if codified, would impact millions of investors.
For example, in 2020, about 5.7 million Americans rolled a total $618 billion into IRAs, according to most recent IRS data. Individuals also funneled $79 billion into indexed annuities in 2022, an annual record, according to LIMRA, an insurance industry group. And 86 million people were actively investing in 401(k)-type plans as of 2019, according to the Congressional Research Service.
The «hidden costs» of financial conflicts in retirement plans amount
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