Testimony to House Subcommittee on Health, Employment, Labor & Pensions

STATEMENT BY
MAX RICHTMAN
PRESIDENT AND CEO
NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND MEDICARE
TO THE SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
COMMITTEE ON EDUCATION AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVESHEARING ON EXAMINING THE POLICIES AND PRIORITIES OF THE EMBPLOYEE BENEFITS SECURITY ADMINISTRATION
THURSDAY, JUNE 27, 2024

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am pleased to submit this testimony for the record regarding the Subcommittee's Oversight hearing on the Employee Benefits and Security Administration (EBSA). The National Committee is a grassroots advocacy and educational organization, and our members come from all walks of life and every political persuasion. What unites them is their passion for protecting and strengthening Social Security, Medicare, Medicaid, and the other programs that are so vitally important to older Americans.

While we appreciate that your hearing will likely cover a range of issues, I would like to focus my testimony on one project, the Department of Labor's (DOL's) Retirement Security Rule and related Prohibited Transaction Exemptions (PTEs). For many years the DOL has worked to protect American workers saving for retirement from investment advice provided by advisors with financial conflicts which may undermine their ability to provide advice that is in the best interest of their clients. This effort has been repeatedly foiled by lawsuits and congressional lobbying by those representing those same financial interests. DOL's most recent, long-overdue, rule will ensure that retirement investors get advice that is in their best interest, not their advisor's.

Since its inception, Social Security has been the foundation on which America's retirement security rests. It has demonstrated its strength by paying benefits without interruption in good times and bad, during periods of recession and disaster and during recovery and healing. It is the only program that virtually every American contributes to and receives benefits from. However, Social Security was never intended to be a workers' only source of retirement income. It was always envisioned that the protection provided by Social Security would be buttressed by traditional pensions and personal savings.

With traditional pensions waning, personal savings have become increasingly important, especially those accrued through employer sponsored retirement savings plans such as 401(k) plans, or through tax advantaged savings plans such as Individual Retirement Accounts (IRAs). Every year, millions of workers set aside portions of their hard-earned wages into these plans with the expectation that they will be invested and managed for their benefit, so the funds will be there to help support them in retirement. As the federal government has long encouraged American workers to save through these programs for their retirement, it is incumbent upon Congress and government agencies to ensure these important assets are protected. This is especially critical as most workers rely on their investment advisors and are unlikely to ever discover their savings have been mismanaged.

The final Rule package issued by the DOL will strengthen protections for workers and retirees who turn to financial professionals for advice on how best to save and invest for retirement. For this reason, the rule deserves the support of Congress.

Small account holders and moderate-income retirement savers stand to benefit most from this rule. It is these retirement savers who are most at risk when it comes to investment recommendations that are not in their best interests. Loopholes in existing regulations allow some financial professionals to provide recommendations that promote investment products with high costs, substandard features, elevated risks or poor returns, costing the retirement saver tens or even hundreds of thousands of dollars in lost retirement income. The more these resources are allowed to be siphoned off to highly compensated, financially conflicted investment professionals, the more American workers will be forced to depend on Social Security to maintain a reasonable standard of living in retirement. While we strongly support updating and strengthening Social Security so it can continue to provide the foundation of financial security for today's retirees and future generations, we also believe it is critical to protect those workers who are able to accumulate personal savings for retirement.

The most immediate threats to the rule and related PTEs are resolutions of disapproval under the Congressional Review Act (CRA). If adopted, such a resolution would not only nullify the current rule, it would prevent DOL from issuing any similar regulations in the future. This restriction would apply irrespective of the specifics or merits of any new rule, effectively barring the DOL from mandating that financial professionals prioritize their clients' best interests when advising on retirement investments. We also expect to see other attempts to overturn or delay the rule and PTEs, whether in the form of appropriations riders or stand-alone bills.

Polling shows that 9 in 10 Americans assume this is already the law and support making this a legal requirement. The National Committee to Preserve Social Security and Medicare urges you to stand with your hardworking constituents saving for an independent and secure retirement by supporting the DOL Retirement Security Rule and accompanying Prohibited Transaction Exemptions. We urge you to use today's oversight hearing, not to undermine the DOL rule, but to support and endorse it on behalf of tomorrow's retirees.