Get ready. There’s a new year coming, and it’s not too early to prepare for it. It’s bound to be bold, exciting, and totally unpredictable.

OK, maybe that’s a bit too far. It’s going to be completely predictable. For example, forget all the “he can’t do that” stuff -- the DOL’s fiduciary rule is dead. With each passing day, Trump proves he can do the unexpected; therefore, the only reasonable thing to do is expect the unexpected.

So, yes, the fiduciary rule is dead. Long live fiduciary!

“Wait!” You might be asking yourself, “How is it possible to simultaneously hold two contradictory views?”

Think of it this way. In the past, when I would search “Fiduciary News” on the nearest search engine, FiduciaryNews.com articles would occupy nearly all the top spots. Today, that same search offers much greater diversity in sources. More important, some of the top spots include mainstream media, not just the trade journals.

We don’t just have John Oliver to thank for this (although he does deserve some credit for his June show that featured “fiduciary”).

Since the DOL came out with the final version of its new fiduciary rule earlier this year, the mass media has exposed the investing public to the issue of self-dealing conflict-of-interest fees to such an extent that “it’s too late to close the barn door because the horse has already left the barn.”

Indeed, even before the actual implementation, major brokerage firms have staked their positions on either side of the conflict-of-interest fee fence. Guess what that means? It means an advertising war between brand-name firms with major league marketing budgets. Don’t think this won’t go unnoticed by retirement savers.

And class-action attorneys. This small niche portion of the retirement industry continually seeks to find a fissure, and simple definition of “self-dealing fees are bad” helps them in their pursuit.

They’ve used it against plan sponsors and investment firms. Now they’re using it against ancillary service providers like record-keepers. If this doesn’t mean “fiduciary” is here to stay…

But wait, there’s more that’s easy to predict. You don’t need to make a great leap to see how even something as right-minded as encouraging more people to save for retirement, if done improperly, can violate the best interest standard (see “Do State-Run Retirement Plans Breach Fiduciary Duty?” FiduciaryNews.com, November 29, 2016).

For example, as last week’s article pointed out, there are people with lower incomes who will do just fine with Social Security. If states force all workers to save for retirement, is that in the best interest of those who don’t need to save? (That may sound like an incredible assumption, but in any “all or nothing” extreme, boundary condition tests are the rule, not the exception.)

Furthermore, it may strike some as unfair for state-sponsored plans funded by tax-payer dollars to compete in the same market with private providers.

To make matters worse, the DOL has made efforts to exempt states from the burden of ERISA protection for investors, placing the private industry at a competitive disadvantage.

So, here’s an easy prediction: Trump’s DOL will quickly quash this ERISA exemption.

The predictions get better. With bipartisan support, we shall soon see legislation that makes 401(k) MEPs the norm. It’s only a matter of whether it’s passed under the current administration or the next (and here, you can expect a tug-of-war to see which president will be remembered for signing this act that may surpass ERISA in its significance).

Once passed, the competitive markets will take over, obviating the need for state-run retirement plans for private employees. But don’t expect the state-sponsored efforts to go quietly into the night.

Just like the big budget marketing war between the brokers, we’re likely to see a campaign of even greater intensity, except in this case it will be one-sided. The states will not be able to justify the advertising expense. Even if they try, it will be too late, as privately sponsored alternatives will have exposed the true risk of state-run retirement plans.

The hard truth is 401(k) MEPs benefit plans sponsors and employees alike. For plan participants, 401(k) MEPs offer more variety of choice with better service and lower fees compared to the state-sponsored alternative. For plan sponsors, 401(k) MEPs allow corporate executives to delegate administration and the bulk, (and, depending on the exact wording of the legislation, perhaps all) of the fiduciary liability.

The shifting of the administrative burden away from the company and toward professionals more equipped to handle retirement plans will not only produce better and cheaper plans, but will permit companies to focus on increase productivity and earnings, and this in turn will fuel economic growth.

See, when you expect the unexpected, predictions come easy.

Instant Insights /

Smackdown 2017: MEP/PEPs vs. state-run private employee retirement plans

More From HR Executive

Related Stories

Recommended For You