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 Responds to Multi-Agency Request for Information on Reporting and Disclosure

The Pension Rights Center issued comments on May 22nd in response to a Request for Information from the Department of the Treasury, the IRS, the DOL, EBSA, and the PBGC on Section 319 of SECURE 2.0.

PRC In the News

Bloomberg Law: Pending DOL Report to Consider Pension Risk Transfer Changes

“We look forward to seeing the report, which we very much hope will include PRC’s recommendations to strengthen protections for workers and retirees when companies transfer their pension liabilities to insurance companies,” said Karen Friedman, PRC’s executive director. “Plan participants lose a lot in these transactions—including valuable [Pension Benefit Guaranty Corporation] insurance and other ERISA […]

Blogs & Newsletters

PRC News, Spring 2024

  New “No conflicts” Retirement Investment Rule Rolled Out  Pension Rights Center Executive Director Karen Friedman joined other members of the Save Our Retirement Coalition at the White House in April for the Biden Administration’s announcement of a new U.S. Department of Labor rule to protect retirement income security.  The rule requires that investment advice given […]

Blogs & Newsletters

NIRS Study Finds Americans Support Pensions to Address Retirement Crisis

A whopping 83% of working age Americans surveyed agree that having a pension makes it more likely to have a secure retirement, the National Institute on Retirement Security found in a recent study. Without a pension, most middle-class Americans won’t accumulate enough savings to be self-sufficient in retirement, NIRS said. The survey found that 77% […]

PRC In the News

Bloomberg Law: Athene-Linked Pension Cases Strike at Need for New DOL Guidance

Annuity-only providers such as Athene may be uniquely prone to risks, because they lack the asset diversification individual life insurers enjoy, said Norman Stein, senior policy counsel at the Pension Rights Center, which advocates for the return of more traditional defined-benefit pensions and opposes pension risk transfers.

PRC In the News

Bloomberg Law: AT&T, Lockheed Suits Mark First Real Test for Pension Transfers

Labor Department guidance requires employers seek out the “safest available annuity,” Norman Stein, senior policy counsel for the Pension Rights Center, said. That standard may not be satisfied if employers opt to work with an insurance company facing significant criticism instead of one that’s universally respected, he said.

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