Possible New Retirement Plan Option for Employees
The Affordable Retirement Advice for Savers Act (HR 2823) of 2017 effectively replaces the previous administration’s fiduciary rule. It aims to provide affordable retirement options especially for low and middle-income families. It also helps small businesses set up fair retirement plans as part of their employment benefits and it promotes access to basic services such as guidance in rolling over funds from a 401k.
HR 2823 zeroes in on the best interests of the clients. In fact, it provides a detailed statutory definition of investment advice which encompasses the duties and responsibilities of advisors as they go over retirement plans with their clients. These financial professionals are duly mandated by law to provide personalized services as they guide their clients through different aspects of retirement including employment benefits and how to manage funds from a 401k. Investment advisors are legally required to protect their clients and be constantly transparent to them, ensuring that all retirement investments do not hurt low and middle class families in the long run.
There is a wider scope of activities subject to fiduciary liability under HR 2823. It also clarifies when a fiduciary relationship is established. It materializes as soon as a financial professional discusses his/her recommendations regarding retirement accounts or when the client acts on the professional’s recommendations.
Prohibitions of the Affordable Retirement Advice for Savers Act
HR 2823 stands by the following prohibitions:
- Financial professional disclaiming a mutual agreement unless explicit disclosures would prove that there was no mutual agreement to begin with.
- Advice from prohibited transaction rules unless certain conditions are met (reasonable compensation is paid, disclosure requirements)
- Signing of a contract prior to talking to your advisor
In its current form, the Act introduced by Rep. Phil Roe (R-TN) is designed in a way to be able to do all these things:
- Offer individually-customized details about related topics ranging from retirement to fiduciary obligations
- Legally require investment advisors to put their clients’ interests first by acting with “care, skill, prudence, and diligence”
- Support creation of small-business retirement plans
- Ensure compliance of transition rules as agreed upon
With HR 2823 here to stay, you can be assured access to affordable retirement advice without sacrificing your clients’ needs and interests.
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