Consumer Protections in Retirement Plans

Are your investment advisors acting in your best interests?

Codes of conduct for those managing your plan and what you need to know to protect yourself if you’re moving retirement money out of your retirement plan and into IRAs or other investments.

There are federal laws that govern the behavior of certain people who manage private retirement plans (pension plans that pay a specified periodic benefit during your retirement, and 401(k) and similar kinds of plans to which you and possibly your employer contribute).  These rules of behavior apply to plan fiduciaries.  Your employer is generally a fiduciary and some of the people or firms who manage your plan may also be fiduciaries.

The good news is that these federal laws require plan fiduciaries to act in your best interests and prudently.  What this means is that a fiduciary must invest plan assets with only your interests, and the interests of the other plan participants, in mind and must use care in making those investments.  If the plan lets you choose investments from a menu of alternatives, the fiduciary must make sure that the investment choices available to you were carefully chosen and do not have unreasonably high fees.  The fiduciary must also monitor the plan investments offered to make sure that they remain reasonable choices for you and the other plan participants.  However, the choices you make about how to allocate your account among the investment alternatives offered to you are your responsibility.

The companies that fiduciaries hire to advise them on investments may be but are not always fiduciaries.  But the good news is that the person(s) or entities that actually makes decisions about how plan assets are invested or what investment choices are available are always fiduciaries who are required to act in your best interests.

Keep in mind that these strict fiduciary standards apply to the fiduciaries who run your private retirement plan. The laws regarding investment advice are less protective once you take your retirement money out of a plan and instead invest it on your own.  We talk about this below.

Here is a problem to watch out for.  The people who keep records for the plan and who you may speak with when you retire or otherwise leave a job may not be fiduciaries.  If they advise you to roll-over money or to take a lump sum, they are not necessarily acting with only your interest in mind.  Indeed, they may get paid high fees for managing your money if you take their advice and invest your rollover or lump sum money with them.  Some mutual fund companies will pay bonuses to their employees when they persuade people to roll over assets.

Indeed, it is often the case that you would be better off leaving your money in the plan, where the fiduciaries do have a duty to make sure fees are not too high.

Learn more about this issue

Click on the headings below to see more information.

Watch out before you seek advice.
Some agencies have implemented rules for investment advisors, but they have been overturned or aren’t strong enough.

Consumer Protections in Retirement Plans Highlights:

Fact Sheets and Issue Papers
04/10/15 |Pension Rights Center

Investment Advisers: Who Are They and Why Does It Matter?

The Latest on Consumer Protections in Retirement Plans:

Comments & Letters

PRC Stands With Coalition To Urge DOL To Finalize Fiduciary Rule

The Pension Rights Center, alongside a group of over forty organizations and individuals, expressed strong support for the DOL’s Retirement Security Proposal, which would strengthen protections for retirees and workers who seek professional investment advice.  

Comments & Letters

PRC Advocates for Conflict-Free Investment Advice

The PRC expressed strong support in written comments for a proposed DOL rule that would ensure that investment professionals who give retirement-related financial advice do so in the best interests of workers and retirees. Read our full comments here.  

Press Release

Save Our Retirement Coalition Applauds DOL’S Public Hearing On Proposed Rule To Protect Workers’ Retirement Savings

The Pension Rights Center joins our fellow Save Our Retirement coalition members in applauding the DOL’s recent public hearing on a proposed rule to protect consumers from conflicts of interest when seeking professional investment advice while planning for retirement.

PRC In the News
10/31/23|Pensions & Investments

Pensions & Investments: DOL, White House unveil latest fiduciary proposal to cover one-time rollover advice

After much anticipation, the White House and Department of Labor on Oct. 31 unveiled a new rule proposal to amend the definition of the term “fiduciary” and require rollover advice be in the best interest of the saver.

Blogs & Newsletters

PRC Voices Concerns on Effect of Plan Information Electronic Recordkeeping

By David Brandolph The U.S. Labor Department should address the challenges and risks faced by employee benefit plan members due to the electronic and digital recordkeeping of their plan information, the Pension Rights Center told the ERISA Advisory Council during recent testimony. Pension Rights Center Senior Policy Counsel and Acting Legal Director Norman P. Stein, joined by […]

Comments & Letters

Senior Policy Counsel Norman Stein Testifies Before the ERISA Advisory Council

Norman Stein, PRC’s Senior Policy Counsel, and Anna-Marie Tabor, a visiting law professor at the University of Massachusetts School of Law and the former director of the Pension Action Center, testified before the Council about the risks posed by electronic recordkeeping and recommended stronger consumer protections including the creation of an electronic shoebox of relevant […]

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