A new report issued by the U.S. Chamber of Commerce says theDepartment of Labor’s proposed fiduciaryrule will create new regulatory burdens on advisors toworkplace retirement plans, the brunt of which will be borne by thecountry’s small businesses.

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SEP IRAs and SIMPLE IRA plans, both designed to encourage smallemployer plan adoption, account for 10 percent of all IRA holdings,and held $472 billion in retirement savings by the end of 2014,according Brad Campbell, an ERISA specialist with Drinker, Biddleand Reath, and the author of the report.

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“More complex regulations mean more hurdles and compliancecosts, and a greater likelihood of lawsuits,” writes Campbell, whowas the assistant Secretary of Labor and head of the EmployeeBenefits Security Administration before moving to the privatesector.

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The DOL’s rule would extend a fiduciarystandard of care to all advisors to workplace retirement plans andIRA owners.

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That would affect how advisors are compensated, and requirethorough disclosures of commission revenue. Sales communications,and potentially other education materials, could be prohibited, andsample investment lineups could constitute investment advice,exposing advisors to greater liability, and ultimately affectingadvisors’ ability to service small plans, thinks Campbell.

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“Main Street advisors will have to review how they do business,and likely will decrease services, increase costs, or both,” hewrote

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That stands to disproportionately impact smaller businesses withSEP IRA and SIMPLE IRA plans.

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“Small businesses may find it even harder to offer retirementplans than they do today,” according to Campbell.

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Both SEP IRA and SIMPLE IRA plans encourage smaller employers tosponsor plans by limiting employers’ record keeping and annualreporting requirements, while giving participants the chance todefer and invest more income than they would be able to in astand-alone IRA.

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Read: Wall Street bristles at new fiduciarystandards

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Perhaps most importantly, sponsors monitoring and fiduciaryobligations are less stringent under SEP IRA and SIMPLE IRA plans.That limits their liability exposure.

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The DOL’s proposal provides a carve out for advisors to largerplans with $100 million or more in assets, or at least 100participants. Advisors to those plans will not have to beconsidered fiduciaries, because sponsors of those plans are largeenough to carry fiduciary burdens themselves, according to reasoning in the DOL’sproposal.

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But advisors to smaller plans will be fiduciaries, and beholdento all of the new regulations in the proposal, meaning they arelikely to incur additional costs that ultimately are passed on tosponsors and participants.

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“Some advisors to small plans may determine that the small-scaleof such plans means the risk of changing business models and feestructures is not justified, and may no longer offer their servicesto small plans,” said Campbell.

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Campbell says SEP IRA and SIMPLE IRAs are popular among smallbusinesses because in part because they are cheaper to offer

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Adding on extra regulatory burdens and costs to small planadvisors, who then pass those costs on, could make SEP and SIMPLEplans less attractive.

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In the end, that could make it harder for small employers tooffer retirement savings plans to employees, thinks Campbell.

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