Some 30 percent percent of small businesses say it is at least somewhat likely they will eliminate their existing retirement plans if the DOL adopts its proposed, expanded definition of a fiduciary, according to a study by Greenwald & Associates released May 14. In addition, almost half the small businesses that do not have a plan but are considering adopting one say that the regulation would make them less likely to adopt a plan.
“The findings presented here show that the DOL expansion of fiduciary status will only impede the ability of small firms to offer their employees retirement-plan accounts, thus hindering American workers from saving for a reliable future,” said U.S. Hispanic Chamber of Commerce President and CEO Javier Palomarez in a press release. His organization was a co-sponsor of the study.
The expected change would effectively prohibit almost all such conversations with small businesses about how to select and monitor the investment options available under a plan and how those investments are performing. As a result, small businesses will be forced to decide whether to perform that function themselves subject to significant liability, or hire and pay an independent expert to do it.
The survey of 607 employers with 500 or fewer employees reveals that:
- About 50 percent of small businesses with a plan say that it is at least somewhat likely the regulation would result in lower matching contributions, fewer investment options and higher fees for participating employees.
- More than 40 percent of small businesses without a plan say the regulation would be at least somewhat likely to cause them to charge participants higher fees and not offer matching contributions.
- More than 80 percent rate the job that their current advisor or record keeper does as very good or excellent when it comes to investment selection, and more than 90% are at least somewhat satisfied with the plan's investment options.
“Expanding fiduciary status would mean that small businesses don’t get the guidance they need. Ultimately, it’s their employees who lose,” said Palomarez. “The unintended consequences of this regulation would hurt those who can least afford to adapt to the changing landscape: the smallest businesses that most need the advice of financial professionals.”
John Iekel is Senior Writer and Editor for the ASPPA Net and NTSA Net portals
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