Tussey vs ABB Offers Both Clarity and Caution

In March of this year the 8^th U.S. Circuit Court of Appeals in St. Louis handed down rulings in the case known as Tussey vs. ABB.  It was a case closely watched not just for its fiduciary implications for plan sponsors, but also for plan service providers.  In this case the service provider happened to be Fidelity Investments, which served as the investment provider and recordkeeper to the ABB plan.

ABB, Ltd., is a supplier of transmission and distribution equipment for the power industry.  This case centered on 401(k) plan fiduciary responsibility, alleged to have been abused by ABB and Fidelity Investments.  Specific allegations included ABB’s supposed failing to properly monitor recordkeeping fees, and selecting unnecessarily costly share class investments.  Recordkeeper Fidelity was alleged to have improperly retained float income associated with the funds used to purchase securities shares as plan investments.  The law firm representing the plaintiffs, Schlichter, Bogard & Denton, has been at the forefront of litigation against plan sponsors for alleged fiduciary failures. 

In the boxing world this one might be called a split decision.  The appeals court upheld a lower court decision that ABB, Ltd., was guilty of “failing to control recordkeeping costs,” and the court affirmed a $13.4 million award to plan participants.  ABB was judged to have failed in the area of due diligence, specifically by not “comparison shopping” or benchmarking the fees it paid Fidelity for recordkeeping.

The appeals court vacated, or set aside, the lower court’s judgment against ABB for its mapping of an investment option between fund families, and subsequent losses to participants who held that mapped investment.  This one will go back to the lower court for further litigation.

One element of the appeals court’s ruling is of particular interest to many retirement plan service providers.  That was its overturning the district court’s finding that Fidelity had improperly used plan assets by not allocating “float” income among the plan’s participants.  “Float” can be described as a sum used to purchase investment shares, held temporarily – for logistical reasons – until it can be paid to the chosen investment funds to purchase the shares requested.  This timeframe is commonly next-day.    

In a strategy that many would call prudent, Fidelity invested this float in secure investment vehicles that could earn interest during the very brief overnight float period.  Earnings, or “float interest,” was distributed broadly among all shareholders of the selected mutual funds, whether these shareholders were plan participants or simply private investors.  Fidelity did not retain the float interest for itself. 

The plaintiff’s attorney claimed that this float interest belonged to the plan, not broadly to all investors in these mutual funds.  The float interest was, plaintiff’s counsel claimed, a plan asset that Fidelity improperly distributed to investors other than plan participants.  Fidelity countered that the participants had been immediately credited with the shares they directed to be purchased, and were entitled to – and paid – any dividends or other gains associated with the shares purchased for them.  The “cash” used to purchase the shares, however, was no longer the property of the plan once the share purchase transaction was executed, Fidelity asserted.  The appeals court found that the plaintiffs were unsuccessful in rebutting Fidelity’s position on entitlement to float interest, and reversed the district court’s $1.7 million judgment against the firm. 

There may be multiple morals to this story, for plan sponsors, administrators and service providers alike.  Especially worth emphasizing is the importance of transparency and due diligence.  Knowing what is being paid for and what is being received, and knowing that amounts paid are “in the ballpark,” is crucial.  We get a sense from this and similar ERISA litigation that “reasonable” is a relatively flexible term in the eyes of the courts, as long as the terms of service and compensation are disclosed.    

EBSA’s New Disclosure Guidance: Questions as Much as Answers

On March 12th, the Department of Labor’s Employee Benefits Security Administration (EBSA) proposed new guidance intended to make it easier for retirement plan fiduciaries to understand information about the services provided to their plans, and the fees paid for them.  Whether or not EBSA’s proposal will become a mandate remains to be seen.  But what IS clear is that the retirement plan community is sitting up and taking notice, and beginning to assess just how challenging it might be to comply if this proposal becomes a requirement.

This latest proposed guidance would amend the previously issued EBSA final fee disclosure regulations, the purpose of which is to assist fiduciaries in prudently selecting and monitoring service providers to their ERISA-governed plans, and to ensure that service arrangements are reasonable.  To accomplish this, detailed information on services and accompanying costs must be disclosed by a covered service provider, or CSP.  A CSP is any entity that expects to receive at least $1,000 in direct or indirect compensation for services – such as advisory, fiduciary, recordkeeping, etc. – to a plan.

The final regulations permit service providers to use multiple documents, such as a collection of contracts, client agreements, memoranda, etc., to disclose services and fees.  The final regulations did not define how such documents were to be organized, or specify that there must be a table of contents, or other guide, to help fiduciaries find the service and fee information.  There was, however, a “sample” guide that service providers could elect to use to help fiduciaries find the required information.  Perhaps that should have been our clue.

Now enter EBSA’s new proposed amendment to these final regulations.  If a single, relatively simple document provides all of the needed service and fee information, all would be well, and no additional documentation would be needed.  But, if a CSP provided service and expense information in a lengthy document, or in multiple documents, this new EBSA amendment would require furnishing a separate guide to help the fiduciary find the required information.

When would this separate guide be needed, and how detailed must it be? It is on these questions that the difficulty of complying will turn.  If multiple documents are used to satisfy the CSP’s fee disclosures, the guide proposed in this amendment would require identifying each document, and within it, each required item of information.  Section or page numbers would be required to narrow down the location of disclosure information within the document or documents. 

As one might imagine, this prescription has generated questions.  Such as, what is “quick?”  What is “easy?”  What is “lengthy?”  And a big one: “who will decide?”  There is legitimate concern that if a guide must have specificity down to the page number, or to the paragraph, it could be extremely costly for a CSP to create custom guides for the many plans it may serve.

Part of our due diligence is to objectively assess the impacts this guidance could have; not just on our compliance practices, our service agreements, or our own bottom line, but also on the costs that will have to be – and many would say should legitimately be – passed on to plans and their participants. 

It must be remembered that this guidance is a proposed amendment, but at the same time it does reflect EBSA thinking.  It is likely to be modified, or reasonably implemented, only if our legitimate objections – should we have them – are vigorously presented and argued.

Will EBSA’s desired ends justify the means?  How simple must we make it for fiduciaries to assess their service provider relationships?  As we judge the pluses and minuses of this proposed amendment, what is the proper balance between perfection and its price tag?  Good questions; so far without answers. 

Get the Facts Straight Before Dissing the Current Retirement System

We hear a lot these days about the supposed inadequacy of 401(k)s and other defined contribution plans for providing income for American workers in retirement.  Those who are most critical sometimes reveal a soft spot for the defined benefit (DB) pension plan, the “no worries” retirement plan designed to provide long-tenured workers with a guaranteed income after leaving the workforce.  Many overlook the fact that, even in the DB heyday, workforce mobility resulted in many, many workers never qualifying for that “large” pension check.   

The truth is, neither the 401(k) nor the DB plan was created to be only leg upon which a retiree would stand during retirement.  The classic model as many are aware is actually a “three-legged stool.”  In addition to an employer-sponsored retirement plan, the other two legs of this stool – by tradition – are Social Security, and additional personal savings and assets of the worker.  Together this three-legged stool would support a reasonably secure retirement. 

As much as we may be frustrated by some academics, think-tank specialists and lawmakers who feel we need a paternalistic, mandated government-run program that guarantees benefits to retirees, we don’t doubt they are sincere in their goal of helping people achieve a secure retirement.   But with the budget woes in which our country is mired, and the extremely divided political climate, a European-style universal defined benefit pension system is not realistic.  Even if that would be desirable.

But before wringing our hands and running for cover, accompanied by shouts of “the sky is falling,” let’s consider some data that suggests that things may not be as bleak as some profess.  The data is presented in an article recently appearing in the Wall Street Journal.  It was jointly written by Sylvester Scheiber, a former Chairman of the Social Security Advisory Board and now an independent pension consultant, and Andrew Biggs, former Deputy Commissioner of the Social Security Administration and currently Resident Scholar at the American Enterprise Institute. 

Scheiber and Biggs point out that the data most often cited to measure the magnitude of qualified plan and IRA payments to U.S. retirees is greatly understated.  How so?  Proposals to revamp the retirement saving system that originate in Congress, or in the halls of academia, routinely cite retirement income figures from the U.S. Census Bureau’s Current Population Survey, or CPS.  But Scheiber and Biggs note that CPS data counts only Social Security benefits and scheduled periodic payouts from retirement accounts – typically annuitized balances in IRAs and defined contribution plans – and DB plan payouts. 

The” as-needed” or irregular withdrawals are not counted, say Scheiber and Biggs, and are huge.  They should know, because they compared CPS retirement payment figures to Internal Revenue Service data on IRA and employer plan distributions, which are required to be reported annually – on pain of penalty – on IRS Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.   

Examples of their findings include the following.  CPS data for 2008 reported $222 billion in “pension or annuity income.”  IRS retirement plan and IRA reporting forms showed $457 billion.  Given the fact that most large balances in employer-sponsored plans are destined to eventually be rolled over to IRAs, where they will probably not be annuitized, accurate IRA estimates are extremely important.  But CPS data is even more suspect here.  In 2008 the CPS reported $5.6 billion in IRA-derived income.  But, according to Scheiber and Biggs, retirees themselves reported $111 billion in IRA distribution income on their tax returns. 

The two former Social Security officials contend that the CPS not only misses at least 60 percent of the IRA and employer plan income being delivered to retirees, but greatly underestimates the share of the U.S. workforce that has an opportunity to participate in an employer plan.  CPS reports that roughly one-half of all U.S. workers have this opportunity, yet Scheiber and Biggs note that the Social security Administration’s analysis of Form W-2 data places the figure at over 70 percent.

Can the U.S. retirement system be made better?  Certainly.  We can retain and enhance incentives for employers to establish plans and encourage early participation, embrace automatic employee enrollment and automatic escalation of employee contributions.  Perhaps create an automatic IRA program for employers not yet ready for the deep end of the pool.  These are things that can make a good system even better.  Let’s consider these, while at the same time recognizing the true magnitude of benefits being delivered now, before we throw the baby out with the bath water. 

Some Good, Much Questionable in Camp’s Tax Reform Proposal

Much of the country may be oblivious to the tax reform proposal that House Ways and Means Committee Chairman David Camp released on February 27^th.  But for some in the financial, tax and retirement sectors, reading this legislative draft was like making contact with a cattle prod.  Despite advance warning of what Camp’s tax reform might look like, it was still a jolt to actually see in print the proposed dismantling of key elements of the retirement saving infrastructure as we know it.

Disappointing, too, that while billed as pursuing the noble aim of putting the nation’s budget house in order, at the same time making taxation simpler for us all, this tax reform proposal takes advantage of a too frequent congressional practice that offers “solutions” that look good in the short term but often come at the expense of budgetary solvency in the long run.

First, I might point out that the tax reform proposal offers a few positive things.  The SIMPLE 401(k) plan, which the tax reform proposes ending, has seen very little adoption from its beginning in 1997, offering greater complexity and less generous benefits than the  more popular SIMPLE  IRA plan.  Medical Savings Accounts, or MSAs, really serve no purpose now that we have Health Savings Accounts, and most would not mourn their disappearance, either.   Some simplification of options is a good thing.

Allowing an extended time period to roll over an outstanding plan loan that is offset when a participant retires would help preserve retirement assets; a win-win, from my perspective.  Permitting a plan participant to continue making elective deferrals after they have taken a hardship distribution is another positive.  The current law’s requirement to suspend deferrals for six months penalizes the participant who wants to save and eliminating this requirement is a step in the right direction. 

There are some reasonable arguments, pro and con, about limiting the length of retirement plan and IRA payouts to nonspouse beneficiaries, or whether to retain the early distribution penalty exceptions for first-time home buyers and for higher education expenses.  Retirement assets are, after all, for retirement, some might say, while others would say that the ability to access funds for these purposes encourages savings and that providing beneficiaries with extended payout options is a useful planning tool.  Reasonable minds may differ.

Other elements of Rep. Camp’s proposal are, I believe, neither positive  nor open to conjecture.  Eliminating Traditional IRA contributions, and forcing IRA, 401(k), 403(b) and 457(b) savers to make more Roth contributions, is a gimmick intended to capture more tax revenue in the short term, in order to pay for Rep. Camp’s other reforms within the 10-year period in which this proposal will be measured.  I’m not saying that Roth contributions are not a good thing, as they clearly are in the right circumstances.  Rather, I contend that eliminating tax deferrals and Traditional IRA contributions is not. 

Understandably omitted from this committee’s summary is the fact that guiding so many contributions into Roth IRAs and Roth accounts in employer plans will result in less tax revenue in the future.  For when these accounts later disgorge qualified distributions, all earnings will be tax-free.  The Roth features in IRAs and employer plans are valuable, but I doubt that the previous Congresses that created them contemplated that tax-free earnings would ever become the rule rather than the exception.  Pre-tax contributions do not result in lost revenue, but simply federal tax revenue collected at a later time, something that too many congressmen and senators either do not understand, or refuse to admit.  Chairman Camp’s tax reform proposal is leading us toward the possibility of revenue shortfalls in the future, leaving it to a later Congress to raise taxes, or cut other expenditures, to correct such shortfalls.

Apart from this Roth-centric proposal’s negative effects on future federal tax revenues, eliminating pre-tax IRA contributions and restricting employer plan pre-tax saving would be detrimental to many taxpayers, who would no longer be able to make reasonable tax planning decisions with the options available to them today.  Contrary to what Rep. Camp may believe, many people would save less, if at all, if they did not receive a current-year tax deduction or exclusion for those savings. 

Though there are numerous other questionable provisions I might cite, I will limit myself to one more.  Perhaps the most indefensible of Rep. Camp’s tax reform elements would lock down IRA and employer plan contribution and testing limits, without cost-of-living adjustments, for a full decade.  How, at a time when Americans are being told they are not saving enough for retirement, when we are seeing presidential orders issued to broaden retirement saving options even further, can we propose to hold contribution limits to present levels for 10 years?  How many workers would be willing to agree to no wage or salary increases for 10 years?  How many senators and congressmen?  Can we count on a 10-year period with no inflation?  It is another example of sleight-of-hand to make the federal budget appear balanced for that period of time.

I admire Rep. Camp for taking on the daunting task of tax reform and balancing the federal budget.  I also know that many Americans will have to make some sacrifices toward that end.  But I’m confident that there are special interests and more dubious tax expenditures – actual tax expenditures – that are more worthy of targeting than American workers trying to accumulate a nest egg for a reasonably secure retirement.  

Tax Court Ruling and IRS Rollover Guidance Don’t Add Up

A recent U.S. Tax Court ruling has set a lot of heads spinning in the IRA administration world, running counter as it does to more than two decades of IRS guidance.  In the case Bobrow v. Commissioner, the Court looked at a situation where the taxpayer, Mr. Bobrow, had made two IRA rollovers within a 12-month period.  Each rollover consisted of assets distributed from a different IRA.  The Court disallowed Bobrow’s IRA rollover on the grounds that he was limited to one rollover per taxpayer per 12-month period, not one rollover per IRA. 

Why is this ruling drawing so much attention?  Primarily because it runs completely contrary to long-issued guidance provided by the IRS, the very agency that is now advocating this new position without any prior warning.  The ability to execute IRA rollovers on a one-per-IRA basis has been described in detail in IRS Publication 590, Individual Retirement Arrangements (IRAs), for at least 20 years, that evidence readily available even now at the IRS’s own web site.  It is not conveyed in a mere statement, but in detailed examples provided to explain the sometimes-misunderstood rollover limitations.  The IRS’s own model IRA documents, on which millions of IRAs are based, state in their instructions “For more information on IRAs…see Pub. 590…”

It is relevant to share the IRS’s own unequivocal guidance on the subject here.  Looking back to 1994, the oldest version of Publication 590 posted at the IRS web site, we find the following.  “You can take a distribution from an IRA and make a rollover contribution to another IRA only once in any one-year period.  … This rule applies separately to each IRA you own.  For  example, if you have two IRAs, IRA–1 and IRA–2, and you roll over assets of IRA–1 into a new IRA–3, you may also make a rollover from IRA–2 into IRA–3, or into any other IRA within one year after the rollover distribution from IRA–1. These are both rollovers because you have not received more than one distribution from either IRA within one year.”  The examples, now even more detailed, continue in Publication 590 up to the most current version.

Some point out that IRS consumer publications, like Publication 590, should not be given credence when compared to the Internal Revenue Code, regulations, revenue rulings, notices, or the like.  To which I answer: how can this agency have spent uncounted taxpayer dollars over the life of this publication—a publication that now runs to 114 pages—for us to be told that its contents cannot be relied on by taxpayers?  Are we not to take seriously the description on the cover that flatly says “For use in preparing 2013 returns?”  No citizen should be expected to go beyond an official IRS tax publication and conduct research in the Internal Revenue Code and arrive at a conclusion different than the IRS published guidance.  More broadly, what is the purpose of the numerous IRS publications on qualified plans, 403(b) plans, armed forces tax issues, education benefits, health and medical tax benefits, and more, if taxpayers cannot rely on their contents regarding potentially critical tax issues?

In rendering its Bobrow v. Commissioner ruling, the Tax Court opinion stated that it relied on the “plain language” of the Internal Revenue Code, and we are objective enough to see how the Code could be construed as limiting annual IRA rollovers to one per taxpayer, instead of one per IRA.  That said, when a regulatory body publishes their interpretation of a code section, taxpayers should and really must be able to rely on it. 

What's more, it seems unconscionable that the same agency that cites “equity and good conscience” when granting taxpayers extensions to the 60-day rollover limitation, would now ignore decades-worth of its own widely promulgated and unequivocal written guidance, basing a new rollover interpretation on Tax Code language it has ignored for that entire period.  Where, pray tell, is equity in this IRS Tax Court litigation, this disavowal of longstanding guidance to suit some short-term prosecutorial aim?

Though few have pointed it out following this Tax Court ruling, there is more one-per-IRA IRS guidance than just Publication 590’s declaration and examples.  The IRS actually drafted proposed regulation language that mirrors the Publication 590 guidance.  Proposed Treasury Regulation 1.408-4(b)(4) states with respect to the one-per-year limitation that “this rule applies to each separate individual retirement account, individual retirement annuity, or retirement bond maintained by an individual.”  This language was proposed in 1981, and undoubtedly influenced IRS technicians who drafted the rollover references now in Publication 590.

With the current high priority the Obama administration seems to be placing on helping more Americans save for a secure retirement, I would find it extremely contradictory and disappointing if the IRS were to reverse itself and its own plan language guidance, and place additional limitations on IRA transactions that this agency has blessed for more than two decades.  

It is my hope that the Tax Court ruling in Bobrow will be overturned, and the IRS either reaffirm the rollover interpretation it has consistently and unequivocally supported or apply this “new” interpretation only on a go-forward basis with an announced future effective date.  

Hopefully myRA’s Ends Will Justify its Unprecedented Means

By now the term “myRA” has probably been absorbed into the consciousness of most who serve the retirement industry, and has generated more “buzz” than any White House proclamation in recent memory. 

How are we to react to news of this administration-proclaimed retirement saving experiment?  Is it a threat to other tax-favored savings arrangements?  Is it a stroke of genius that will fill an unmet need for a segment of the working population?  Is it politically motivated, at a time when the administration has been unable to advance its agenda in Congress?

According to a White House fact sheet, a myRA (presumably standing for “my retirement account”) would allow those without a retirement plan at work to begin saving in very small amounts in government-backed, principal-guaranteed accounts.  Upon reaching $15,000, balances would be transferred to a commercial Roth IRA.  Ostensibly, there would be minimal fuss for employers and no risk of loss for employees, at least until a wider selection of investments became available after transfer to a Roth IRA.  It is to be a pilot program, limited to those whose incomes do not exceed $191,000, and whose employers enroll by the end of 2014. 

Many analyses have appeared in the media, some providing more of the still-incomplete details on this program.  It is not my purpose to replicate these analyses here, or come to any final conclusions on the questions we have raised above.  I do not wish to rush to judgment; it remains to be seen whether this pilot program really IS different enough—and sufficiently needed—to serve a genuine purpose as a missing link in the retirement saving chain.  What I wish to comment on here is the precedent, maybe unsettling to some, this executive action may represent, creation of a new type of retirement account by “decree” rather than a thoughtful legislative process. 

In my long experience serving and observing the retirement industry, I can remember no previous presidential act that created a program of this nature by executive order.  The now-barely-remembered Medical Savings Account, or MSA—since supplanted by the Health Savings Account—began as a pilot program.  But this pilot program was created by Congress.  We understand that the current climate in Congress is resistant, if not actually hostile, to compromise, which makes meaningful lawmaking very difficult.  But that does not alter the fact that certain functions in our democracy are generally viewed as the province of the constitution’s lawmakers, the definition of which does not include the president, or the judiciary for that matter.  The question one might ask is even though “authority” says the President could, should it have been done in this manner.  Will this have the stated desired effect of increasing retirement savings or will it create more division within a political environment full of strife already. 

My concern is not simply one of form, or appropriate roles under the constitution.  The process by which laws are proposed and passed by Congress is as purposeful as it sometimes is frustrating.  There is a reason why laws are the product of a process involving the nation’s political parties, and its two lawmaking bodies—each of which is elected by very different constitutional procedures.  The process gives at least some measure of assurance that a proposal will be scrutinized, debated, its tax impact calculated and social impact examined.  A law-in-progress will go through one or more committees that have not only jurisdiction, but hopefully expertise on the matter at hand.  In short, even a new law will have had an opportunity for refinement, and will have a procedural history that can be of great importance to interpreting and carrying out its intent.

An executive order, on the other hand, may have few or none of these things.  Certainly it will be lacking in scrutiny and debate, little opportunity for refinement, and no history to help in its interpretation and execution.  The extensive body of U.S. retirement plan law and regulations did not have origins as a state-of-the-union surprise.  As imperfect as this body of law might be, it can never be characterized as arbitrary, unilateral, or as legislating by decree. 

Now, as always, I am in favor of giving American workers any and all useful tools to help them save for retirement.  If implemented, I hope the myRA proves to be such a tool.  But I find it hard to ignore the possibility that its genesis may set a precedent that future leaders may use as a shortcut or end-run around the proper body—Congress—in which this responsibility should reside.

Concern Over EBSA Fiduciary Standard is Still Bipartisan

One of the favorite targets of some lawmakers in Washington, D.C., is federal regulations.  The typical argument is that too many regulations strangle business flexibility and opportunity, and have a depressive effect on our economy and job creation.  A contrary view is that, without federal regulations, fair trade, employee welfare, the environment, public health, and other areas of “public good” would suffer greatly.  We’re not going to get into the middle of this broad debate, there undoubtedly being merit on both sides.  But as always, we will eagerly offer our two cents worth when a regulatory issue clearly affects our industry.

One of these issues is the definition of “fiduciary” as it applies to investment advisors and other professionals who deal with employer sponsored retirement plans and IRAs.  Recently a number of congressional Democrats—who have dubbed themselves the New Democrat Coalition—sent a letter to recently appointed Secretary of Labor Thomas Perez, expressing their “concerns about the department’s proposal to redefine the term “fiduciary” for purposes of … ERISA and … Individual Retirement Accounts and similar arrangements.” 

Mr. Perez is the second Secretary of Labor to receive a such a message from Congress.  In November of 2011, 55 congressional Republicans and 30 Democrats petitioned then-Secretary Hilda Solis to request that her agency—more specifically its Employee Benefits Security Administration (EBSA) arm —narrow the scope of the fiduciary definition regulations that were pending at that time.  As we know, the anticipated fiduciary definition regulations were withdrawn and have been “pending” ever since.

Lawmaker concern then, as now, is not merely that EBSA may be poised to overstep its regulatory bounds, but that it will also damage the ability of many IRA owners to get investment advice to help them grow the assets they will need for a comfortable retirement.  It should not be lost on anyone that the concern has been bipartisan, expressed by both Democrats and Republicans.  That Democrats would break ranks and go on record with their anxiety about the direction of their own president and his appointees, speaks volumes.

IRAs are not governed by ERISA and many feel it can be legitimately argued that EBSA does not have regulatory authority over them.  One might counter-argue that assets that have been accumulated in an employer plan may deserve the same fiduciary considerations when they leave that plan and become IRA assets.  Fair enough.  But that’s not the whole story.  What is concerning is the potential of an ERISA fiduciary standard for IRA to leave many, many IRA savers with fewer investment options than they now have. 

There is risk and cost attached to expertise.  It’s as true in the IRA market as it is of the contractor who builds your home, or the mechanic that replaces the timing belt on your automobile.  Those who do it properly have more training or experience—or both—and there is a cost for this level of expertise.  Simply put, it will likely cost more to work with an advisor who can meet the ERISA fiduciary standard than one who operates on a more general level of investment suitability. 

We have heard comments from numerous advisors stating that they will not be able to serve low-balance or beginning IRA investors, because the fees they would have to charge would undoubtedly seem unreasonable; fees that, with a larger balance against which to amortize them, would seem fair and legitimate.  Some have told us that a client with smaller balances  of say less than $25,000, or $50,000, simply could not be served by them. 

The net effect for low-balance or new IRA savers could be the unavailability of some important types of investments, chiefly securities.  Such investments have historically given savers the most attractive returns in the long run, and thereby could have the greatest potential to assist in achieving retirement security. 

While we recognize the need for advisors to act in the best interest of their clients, the concerns being expressed across a landscape stretching from Wall Street to Pennsylvania Avenue seem legitimate.  Any regulations defining fiduciary for retirement saving purposes have to be practical, sensible, and should not be punishing to an important segment of those who are saving for retirement.