How Government Regulations May Impact the “Average Joe”
We tend to take government regulations for granted. They can be annoying, like having to sign the HIPAA privacy notice before a doctor’s visit, or time consuming, like the yearly requirement of filing a tax return.
But as the new presidential administration begins rolling back financial regulations, some people may wonder how they might be affected. In fact, there’s a near-even split among Americans who think we don’t have enough regulation of the financial industry (49 percent), and those who think we have too much (42 percent).1
Opponents say regulation hampers economic growth. Others disagree, saying that some regulations have proved effective at enhancing economic growth at the household level. Take, for example, the 2012 rules requiring 401(k) plan sponsors to disclose certain expenses related to administration and management of plans so participants understand how the fees impact their account value.2 Although the rules did not mandate how much plan sponsors could charge, 401(k) fees have declined in nearly all market segments.3
Let’s take a look at another controversial regulation: The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. The law was designed to eliminate hidden fees that came from such practices as increasing interest rates on existing balances or applying payments to balances with the lowest interest rate.4 Four years later, researchers at the University of Chicago’s Booth School of Business found that the credit card act was directly responsible for saving credit card holders about $20.8 billion a year.5
Unfortunately, there is little the average citizen can do to change the tide of government agendas, whether that means more regulation or less. That’s one good reason to diversify your assets, particularly those earmarked for retirement. If all your assets come from one basket that is then affected by some new form of regulation, you could feel the impact in your retirement income. If you’re interested in learning whether insurance products may fit into your retirement income strategy, please let us know.
Content prepared by Kara Stefan Communications
1 Samantha Smith. Pew Research Center. March 2, 2017. “Public Remains Divided Over Role of Government in Financial Regulation.” http://www.pewresearch.org/fact-tank/2017/03/02/public-remains-divided-over-role-of-government-in-financial-regulation/. Accessed March 14, 2017.
2 U.S. Department of Labor. February 2012. “Final Rule to Improve Transparency of Fees and Expenses to Workers in 401(k)-Type Retirement Plans.” https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/fsparticipantfeerule.pdf. Accessed March 14, 2017.
3 401kHelpCenter. March 7, 2017. “Lower Investment Fees Help Push 401k Fees Down Last Year.” http://www.401khelpcenter.com/401k_press/pr_401kaverages_030717.html#.WMhQRPkrKM-. Accessed March 14, 2017.
4 Gerri Detweiler. Credit.com. Feb. 24, 2017. “How the Credit CARD Act of 2009 Affects You.” https://www.credit.com/credit-law/credit-card-act-of-2009/. Accessed March 14, 2017.
5 Floyd Norris. The New York Times. Nov. 7, 2013. “Card Act Cleared up Credit Cards’ Hidden Costs.” http://www.nytimes.com/2013/11/08/business/economy/a-credit-card-rule-that-worked-for-consumers.html. Accessed March 14, 2017.
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