Blindly Running in Circles

Several horses at this Saturday’s Kentucky Derby will be wearing blinders, allowing them to ignore everything going on around them.

It’s a proven strategy — if you’re running around in circles.

If I didn’t know any better, I’d swear the U.S. Department of Labor was wearing blinders when it developed its recent fiduciary-only regulation. Because it ignored everything going on around them and returned full circle with a rehashed measure that will harm retirement savers like its 2016 regulation that was vacated by a federal court.

Like the 2016 version, the latest regulation effectively eliminates important sales information and recommendations mainly used by low- and middle-income retirement savers looking for guaranteed lifetime income from annuities. This leaves fiduciary advisors as the only option for retirement savers needing professional financial guidance. But fiduciaries usually limit their services to clients holding at least $100,000 to invest, far more than most working-class Americans have in savings.

The DOL ignored this and charged ahead with its fiduciary-only package anyway. It also ignored several other critical factors including:

• The harm caused by its 2016 regulation, which resulted in more than 10 million American workers’ accounts with $900 billion in savings losing access to professional financial guidance.

• The Fifth Circuit Court of Appeals striking down the 2016 regulation. That ruling made clear that the DOL’s actions were inconsistent with the Employee Retirement Income Security Act, a federal law governing retirement benefits.

• The 45 states that since 2020 have implemented the NAIC’s Best Interest enhancements to the Suitability in Annuity Transactions Model Regulation. More than 90% of Americans now live in a state that has adopted a Best Interest standard for annuity sales. This state-based protection aligns with the federal Regulation Best Interest adopted by the U.S. Securities and Exchange Commission in 2019.  These standards address the same issues DOL is attempting to address in its current fiduciary-only proposal – without limiting access to professional financial guidance.

• The bipartisan group of 50 members of Congress who wrote the DOL opposing its package.

• The will of Congress, which in 2019 and 2022 passed with overwhelming bipartisan majorities the SECURE Act and SECURE 2.0, which made it easier for workers to access guaranteed lifetime income as part of workplace retirement savings plans. 

• The will of the American people, which has been turning in record numbers to annuities, which can provide guaranteed income for life.

• Demographic trends, which show that the largest number of Americans in history will turn age 65. Most will not have access to a traditional pension and will be relying on their personal savings to last throughout retirement.

Anybody not wearing blinders can plainly see that the DOL’s actions to mandate a fiduciary-only regulation is bad public policy. ACLI is considering future actions to protect retirement savers and their access to the products and services they need for financial certainty through retirement.