There’s a difference between an ideologue and a politician. One fights for a cause and the other causes a fight. I’ve always viewed Phyllis Borzi more of an ideologue than a politician. As a result, regardless of your political leanings, I think she deserves respect.

She is someone who is to be admired. I believe she fought earnestly and honestly for a pure fiduciary rule. Like President Trump, she wasn’t afraid to upset the right people. In that way, she was a selfless advocate for the best interests of retirement savers. Unlike others, she wasn’t taken in by the industry’s spurious arguments.

Washington, however, doesn’t reward ideologues. It rewards politicians – those that know how “to play the game.” It’s an insider’s game, with unwritten rules where the points – and the sides – don’t matter. It’s a series of tit-for-tat trade-offs no purist could tolerate.

Tom Perez is no purist. When he came to the DOL, the only question was whether he was a pragmatist or a politician. Both can get the job done, but while the former leaves behind the satisfaction of gracious professionalism, the latter simply leaves the sour taste of the con.

This weekend we confirmed Tom Perez is a politician, which leaves one to question the milestones he left behind during his tenure atop the DOL. Were they in earnest, or were they undertaken with a long-term political calculus as their motive?

In a way, I feel sorry for Phyllis Borzi. Though she and Perez likely agree on most partisan matters, their motivations appear totally different. It’s a shame that her reputation might be bundled up with that of Perez’s. It’s not fair to her or the valiant efforts she made on behalf of the fiduciary cause.

Specifically, my fear is some may find her complicit in what many are starting to see as the most egregious of offenses decreed by the DOL as the final months of the Obama administration drew to a close. This was the rule that allowed states to disregard ERISA in the provision of retirement plans for private employees (see “Are We Better Off With or Without ERISA? And What are the Implications?” FiduciaryNews.com, February 28, 2017).

Recall that state employees were never afforded ERISA protection. In retrospect, with quite a few states suffering from underfunded pensions and one good recession away from retirement plan insolvency, the lack of ERISA protection is a bad thing for state employees.

On the other hand, it’s a good thing for American tax payers, as they have no obligation to bail out states that exhibit the least in financial prudence.

And if you look at the states leading the way in offering state-sponsored retirement plans for private employees, you’ll find the same states who have led the nation in mismanaging their public employee retirement plans.

It doesn’t take a rocket scientist to figure out their modus operandi. With underfunded public employee retirement funds, these states are in dire need of money.

What better way to generate revenues than by tapping into the trillion dollar private employee retirement plan industry. Now, that’s a very competitive industry, so the states needed a way to gain the advantage.

The quickest way to gain that advantage was to offer a lower cost alternative. For those familiar with the retirement plan industry, among the most significant operational costs to service providers relate to compliance, including (and especially) ERISA compliance.

Worse for the states on this matter, while private service providers have had decades to amortize the cost of ERISA compliance, the states would be starting from ground zero.

All the associated start-up costs would create one of the highest cost alternatives. To alleviate this, states lobbied the Obama administration to exempt them from ERISA.

Last summer, under the direction of then DOL Secretary and now DNC Chairman Tom Perez, the DOL announced its final rule that provided states a safe harbor from ERISA.

With that, states no longer had to undertake the expense of ERISA compliance. Furthermore, this allowed the states to potentially undercut private competitors on fees.

This was great for the states, not so great for any private employees that value the benefits of ERISA protection.

Now here’s where the great irony comes in. Just months earlier, the DOL professed to making the “best interests” of retirement savers the number one priority. Now, the DOL was saying states’ rights have priority over the best interests of retirement savers.

If you think this doesn’t add up, consider this: If we can’t believe their statement regarding the sanctity of retirement savers’ best interests, how can we believe their “fiduciary” rule can really do what they promised it would.

“If you like your retirement plan, you can keep your retirement plan.” Those exact words weren't spoken last August, but plenty of people heard them.

For the record, I don’t believe Phyllis Borzi was complicit in any ruse.

Instant Insights /

State-run SNAFU: 'If you like your retirement, you can keep your retirement'

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