Bill would allow independent advisers to counsel 401(k) recipients

A key Congressional committee is expected to vote on a proposal – as early as next week -that could potentially bar thousands of brokers from providing investment advice to 401(k) participants, according to sources.
The House Education and Labor Committee appears set to weigh in formally on the bill, the Conflicted Investment Advice Prohibition Act of 2009, which was introduced by Rep. Rob Andrews, D-N.J., in April.
This bill aims to allow only independent investment advisers — essentially those advisers whose compensation is not affected by the counsel they provide — to work directly with 401(k) participants.
A spokesman for Mr. Andrews, who is also the chairman of the Subcommittee on Health, Employment, Labor and Pensions, did not respond to several requests for comment.
However, Labor press secretary Aaron Albright confirmed: “We are looking at committee action very soon” on this bill, although he could not offer a timetable.
This Andrews bill effectively would repeal the Labor Department’s ruling update this year of the Pension Protection Act of 2006.
In January, the Labor Department finalized a ruling that permits brokers and reps affiliated with financial services providers — such as brokerage firms and investment companies — to provide 401(k) participants with advice on their investments.
Labor Department officials said at the time that this ruling would make it easier for employers to access financial advice for their workers.
It was supposed to be put into effect last month, but the effective date has been pushed back to November, confirmed a Labor Department spokeswoman. This is the second time this year the rule’s implementation has been delayed.
In a March hearing on retirement security and independent investment advice, Mr. Andrews stated that the Labor’s ruling “would expose millions of Americans to the Madoffs of the world.”
“During a time where American workers have already lost $2 trillion in assets due to last year’s market downturn, exposing their hard-earned retirement savings to greater risk by allowing advisers to offer them conflicted advice is irresponsible and imprudent,” he said.