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Sec. Perez addresses fiduciary standard during CEO roundtable

Commentary: A few months ago, two major announcements were made in the retirement plan space that profoundly affected retirement plan sponsors and participants.

First, the White House directed the Department of Labor to move ahead with the proposal that would raise investment advice standards for brokers and advisers handling retirement accounts to that of a “fiduciary standard of care.” Second, one of the largest 401(k) plan lawsuit settlements in U.S. history was announced. Lockheed Martin agreed to write a check for $62 million to its own 401(k) plan due to excessive fees inside their plan.

Both announcements were, as they say, game changers.

Also see: 9 FAQs about fiduciary responsibility

In the few months since those two announcements, there have been many opinions, on both sides of the issue, as to why each side has merit.

However, no matter which side of the issue one comes down on, one thing is very clear: this long debated topic is no longer conjecture or speculation. It is serious business – and the President of the United States asked the Secretary of Labor, Thomas Perez, to do something about it.

As part of his personal initiative to listento the opinions of those this regulation will affect, Secretary Perez recently chaired a 26-person roundtable comprised of the CEOs, CFOs and directors’ of human resources for some of Tampa Bay’s largest and most influential corporations and not-for-profit organizations.

The topic of the roundtable was the very initiative Secretary Perez and President Obama announced on February 23 – the fiduciary standard of care for all retirement plans in the U.S. and the importance of eliminating the excessive fees and conflicts of interest currently embedded in many U.S. retirement plans.

The Secretary set the tone of the discussion by putting the focus where it should always be – on the employee. “Your most valuable assets are your employees, and all of you want to make sure they are in a position to make informed decisions,” he said.

Also see: DOL adding 15 days to comment period on fiduciary proposal

He went on to put the fiduciary standard into a context that everyone could relate to. “There are three important decisions you make in life: medical, legal and financial. Doctors have responsibility to put the patient first. Lawyers have a clear obligation to look out for the best interest of the client. The financial piece is a challenge because it’s on a continuum, and consumers are getting conflicting advice,” he said.

As the discussion progressed, there seemed to be agreement that the establishment of a fiduciary standard, with the goal of eliminating conflicts of interest and excessive fees in retirement plans, was a good thing.

In fact, one executive remarked “why is this even a debate? This is something that makes so much sense I am confused as to why anyone could oppose a rule that does so much good for plan participants.”

As obvious as the benefits are that accrue to plan participants under a new fiduciary standard for retirement plans, there will always be detractors. That is just the way our system works.

With that in mind, there are conversations that need to take place by the key stakeholders of every retirement plan in the U.S. These conversations need to include individuals that are independentlyqualified to render expert opinions on what is reallyhappening within their plan – not just what the current plan broker or plan provider tells them.

Also see: Brokerage firms no longer able to avoid fiduciary responsibility

To that point, several CEOs remarked the “broker” to their respective plans told them, or someone at their company, they are “fiduciaries” – which cannot be true given brokers cannot legally be fiduciaries. But, until now, they did not know that and had little basis to question those assertions.

In addition to conflicts of interest and excess fees, yet another important item plan sponsors need to look at on behalf of their plans.

In short, it was clear the roundtable attendees now have a new perspective on the retirement plans their companies offer to employees – thanks to Secretary Perez and his obvious commitment to do what he can to help American workers attain the best retirement possible.

Matt DiGennaro is the founder and CEO of Seabridge Wealth Management LLC, a registered investment advisory firm offering ERISA § 3(38) advisory services to corporate, not-for-profit and government retirement plans. Seabridge hosted Secretary Perez at the CEO roundtable on May 13.

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