The federal
government is going to allow retirement investments to be subjected to
politically correct funny business due to a new guidance issued by the U.S.
Labor Department that puts the government’s thumb on the scale in favor of
so-called “socially responsible” investments.
Prior to the Obama
administration action, these politically correct investment vehicles needed to
match their peers by meeting the same fiduciary standards in order to qualify
for inclusion in a 401(k) or pension plan. In fact, in previous guidance
offered the financial services industry, the Labor Department flatly stated
that the occurrence of these funds in a qualified pension plan should be
“rare.” All that changes now, as the Labor Secretary flanked by the Chief
Financial Officer of the Service Employees International Union opened the
floodgates for investment schemes whose first priority is political change
rather than return for the investor.
Why would the Obama
administration allow pension fund managers and indeed, individual investors who
control their own retirement accounts to gamble on politically motivated
investments?
$8.4 trillion is
why. That’s how much money is in the retirement funds (primarily 401ks and
pensions) covered by the federal government’s Employee Retirement Income
Security Act, which previously were protected from being invested in
politically motivated funds.
Now, union pension
plans will be able to gamble their member’s retirement security on
Solyndra-like schemes and avoid the Exxon-Mobils of the world that pay a
dividend and have an actual real business. Those depending upon
retirement payouts won’t realize twenty years from now when their pension
payments have to be cut because the money isn’t there, that their future was
traded for transitory political whims.
This is not to say
that people should not be able to invest in whatever they want with their
money, but pensions and 401(k) plans are different. People depend upon
pension fund managers to invest wisely so they can receive a promised amount each
month when they retire. They expect that money to be there because it was
promised. They don’t care if the pension fund manager is investing in
FritoLay or Charmin, they just want their payout when they retire.
401(k)s are
different in that the individual directs his or her investment under the
presumption that every one of the offerings has at their heart, the fiduciary
interest of the employee. Now, that assumption will no longer be true as
mutual funds with social change as their primary goal will litter portfolios at
the expense of other more solid investments.
Most perniciously,
the opportunity for political chicanery has not been lost on the left, as
divestment mania is being fed by their minions all over college campuses — a
movement to dump stocks of companies deemed socially irresponsible — divorcing
pension funds from fiduciary responsibility opens the doors for political
pressure to dictate investments not the needs of pensioners.
For those who claim
that fiduciary responsibility is still the key element of investing under the
new Labor Department guidance one only has to ask, then why was the new
guidance needed? So-called socially responsible investing was allowed
under the old law, but it could only be considered after fiduciary factors, not
before. The new Labor directive makes it clear that these political and
social factors can and perhaps should be part of the fiduciary analysis baking
the cake in favor of whatever social outcome is desired.
After all, the
American taxpayers “invested” more than half a billion dollars in Solyndra,
because it was a can’t-miss solar panel manufacturer, only to lose
everything. If the full weight of the federal government at a time when
propping up green energy firms against the markets was the norm could not keep
this type of socially responsible investment alive, then nothing can.
Only if it happens to pension funds or mutual funds in a 401(k) it won’t be
taxpayer dollars lost, but the retirement security of millions of Americans.
Investing is risky
by nature, and the Labor Department’s actions are designed to create additional
risk to workers’ retirement security. Congress should take action by
defunding the implementation of their new politically motivated investment
guidance before retirees get hurt.
Richard Manning is president of Americans for Limited Government.
Follow Americans for Limited Government on Twitter@LimitGovt,
find them on Facebook and visit their website.
http://www.foxnews.com/opinion/2015/10/28/beware-america-president-obama-has-put-politics-into-your-pensions.html
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