Those who argue against the change say it will prevent small IRA holders from being handled by brokers because the brokers are compensated through commissions and sometimes from the fund they put the person in, which would be considered conflicts.
And advisors will not want to handle small IRAs because the fee would be too small to be worth the work put into it.
"I know the Labor Department has good intentions of trying to enhance security for retirement savings," says Kent Mason, a partner with Davis & Harman law firm, and an expert on the Labor Department fiduciary rules, who opposes the changes. "But these changes will inadvertently have the opposite effect.
"Small IRA owners, and there are 7 million small IRAs, would lose all access to advice. The affect would be that 350,000 IRAs that normally would be opened in a year will not be opened," Mason says.
"Small employers wanting to set up IRAs for employees would be forced to look at thousands of choices of funds, rather than have a service provider narrow the choices of funds for their employees, because the provider would suddenly be considered a fiduciary," Mason says.
Mason and those opposing the change want the proposal rewritten and want the public to have another chance to comment on the new version. Currently, the Labor Department is reviewing the public comments that were given at hearings and considering possible changes to the proposal.
-Karen DeMasters