Generally, retirement plan providers or the advisers who sell retirement plans work with businesses and assist in selecting and monitoring funds that are made available to the respective employees. However, a new rule proposed by the Labor Department is attempting to ban providers and advisers from assisting in this role under a new “fiduciary rule.”
While the intent is to protect small businesses from investment advisers who seek to profit at the expense of their clients’ retirement funds, an unintended consequence may be that many businesses may no longer offer retirement plans to their employees.
A recent survey
of over 600 retirement-plan decision-makers for businesses around the country found that almost 30 percent of small businesses would elect to no longer offer retirement plans under the new rule, or would at least reduce matching contributions. Without the aid of the plan providers or advisers, many small businesses would be unable to perform the adequate research or due diligence needed and would need to hire a third-party to perform the role or stop offering plans.
If you’re a small business owner, this continually unfolding topic is one to stay on top of. If you rely on the advice of your retirement plan provider, you might consider an alternative in case the rule passes. You could also elect to offer self-directed retirement plans; such as the Simplified Employee Pension Plan (SEP IRA) or Savings Incentive Match Plan for Employees (SIMPLE IRA).
If you’re an employee, this is another reason why taking control of your own retirement funds via a self-directed IRA could be a sound strategy. With the ever-changing nature of the nation’s laws and regulations, it is more important than ever to have an alternative that is under your control.