State of New Mexico

Susana Martinez
Governor

August 19, 2015

The Honorable Thomas E. Perez
Secretary of Labor

Department of Labor

200 Constitution Ave., NW
Washington, D.C. 20210

Dear Secretary Perez,

| am writing you today to express my concerns with the recently released Department of Labor
(DOL) proposal to change the definition of fiduciary investment advice under the Employee
Retirement Income Security Act of 1974 (ERISA), and to encourage you to make the
appropriate changes necessary to protect the financial savings of all New Mexicans.

Like many states, New Mexico citizens often face challenges when saving for retirement. We
are ranked 42” in the nation when it comes to median household income, and more than 60
percent of New Mexicans report not having enough “rainy day” savings for a three-month
emergency fund. These numbers indicate that our residents have a great need for education
and guidance that prepare them for a stable retirement. Ensuring that our families are able to
access the tools and resources they need to make adequaie financial decisions to fund their
future is critical to the success of our region.

| appreciate the DOL's goal to improve investor protection. However, the proposal in its current
form will hurt New Mexicans’ ability to plan for their future. For example, the proposal’s new
Best Interest Contract (BIC) exemption should be modified so that it applies to small pians. The
BIC excludes sponsors of small, participant-directed plans, meaning these sponsors cannot
request assistance from advisers or record-keepers when structuring plan line-ups. Further, the
proposed rute will limit our small businesses from receiving the help they need to establish and
maintain a retirement plan, resulting in many plan sponsors either not creating plans or
terminating existing plans. This would hinder many New Mexicans in their efforts to save for a
secure future.

| am also concerned that the proposed rule will limit the access that individual investors
currently have to affordable financial planning services and resources. Under the rule’s
redefinition of “investment advice,” job changers will lose access to much of the critical
education they rely on today. Employees change jobs several times over the course of their

State Capitol * Room4oo * Santa Fe, New Mexico 87501 + s05-476-2200 + fax: 505-476-2226



Secretary Perez
DOL - ERISA
August 19, 2015

working lives. We have seen data indicating that investors who receive personalized assistance
and coaching from a financial professional when they change jobs are three times less likely to
cash out from their retirement savings plan. The proposed rule could potentially hurt investors
by increasing the likelihood that they take premature distributions from their retirement savings,
subjecting individuals to severe penalties, taxes and, ultimately, decreased retirement savings.

In addition, permissible investment education is significantly scaled back under the proposal.
Under the proposed rule, the critical step of translating general investment education and
guidance into relevant examples of specific funds would be considered prohibited investment
advice unless an adviser is able to meet the BIC’s burdensome conditions and disclosure
requirements. A general discussion of asset allocation without the ability to review examples of
funds that fit within the asset classes will be of little help to most individuals, leaving them more
likely to make inappropriate investment choices.

As Governor, my primary concern is that all New Mexicans, especially those who fall below the
median income threshold, are provided opportunities to save for their futures or for their small
business futures. While | appreciate the intention to provide enhanced protections for those
saving for retirement, the proposed language would hurt the same individuals for whom this
proposal is intended to protect—particularly lower-and-middle income individuals who may find
that they can no longer afford the investment help they need.

| thank you for your consideration and review of my concems as they relate to New Mexicans
who are saving for retirement and the small business owners trying to do right by their
employees. The final rule must enable financial service providers to continue educating New
Mexicans on investments and savings for both individuals and small businesses. | have
confidence that we can work together to encourage more individuals ta save responsibly in an
easy-to-understand approach.

Sincerely,
Martiar
Susana Martinez

Governor