On April 14, the Labor Department proposed new rules to provide greater protection for retirement savings. The proposed rules, if finalized, would strengthen requirements for brokers and investment advisers to act in the interests of investors with regard to individual retirement accounts (IRAs) and 401(k)s.

The proposed rules are intended to protect investors from being steered into investment products that are unduly complex or otherwise inappropriate. One situation where small investors are particularly at risk is when they roll over funds from 401(k)s, which are managed by employers, into IRAs. Under current rules, brokers advising investors on that transaction do not necessarily have to act in the investor’s best interest. Instead, they may be influenced by higher commissions on certain investment products.

The new rules would modify the Employee Retirement Income Security Act (ERISA), passed in 1974, broadening the circumstances in which investment professionals are required to act as fiduciaries, or in the client’s interest. Currently, only registered investment advisers are required to act as fiduciaries, while brokers making recommendations about retirement investments are only required to offer “suitable” investments. There is enough leeway under this definition for brokers to steer investors toward products with a high commission that may not actually be in their best interests. Under the new rules, brokers would still be able to charge commissions, but they would enter into contracts with investors stating that they are required to act in the investor’s interests, and disclosing any conflicts of interest.

If the proposed rules are finalized, expanding the circumstances when an investment professional is required to act as a fiduciary is expected to save investors $40 billion over ten years.

Now that the proposed rules have been announced, the Labor Department will accept comments from the public for a period of 75 days, after which the content of the final rules will be decided.

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