The Right Direction

Jan 24, 2023

[IMPACT+: This series features IMPACT posts that take a longer look at vital topics that affect Americans.]

It’s no wonder that annuity sales figures for 2022 will likely shatter the all-time record. With fewer employers providing traditional lifetime pension benefits and today’s unpredictable economy, the importance of guaranteed income has never been stronger.

The U.S. Congress clearly understands the usefulness of annuities. In landmark legislation known as SECURE and SECURE 2.0, Congress made it easier for employers to offer in-plan annuity options to their employees and simpler for savers and retirees to use an annuity that fits their needs including Qualified Longevity Annuity Contracts, which provide guaranteed income later in life.

Those bills were passed by overwhelming bipartisan majorities and signed into law by presidents of both parties. Nevertheless, the Department of Labor in Washington D.C. seems determined to head in the opposite direction.

The DOL is considering resurrecting a long-discredited fiduciary-only regulation that will make guidance about annuities and other financial products unavailable for many working-class Americans. Workers who don’t have $100,000 or more in savings required by most fiduciaries would lose support from financial professionals who receive one-time commissions.

That would exclude a large chunk of American workers, including the vast majority of Black and Hispanic Americans, from accessing retirement savings products. The median retirement savings for Black and Hispanic households is less than $30,000. And while their savings will probably be higher near retirement, fiduciary services will likely remain out of reach for many.

The DOL’s proposal is not only misguided; it’s unneeded. Since the DOL’s previous attempt at a fiduciary-only regulation was vacated by the Fifth Circuit Court of Appeals in 2018, both the Securities and Exchange Commission (SEC) and the states have aggressively moved to provide consumers with new robust financial protections.

As explained in an ACLI White Paper, the SEC’s 2019 Regulation Best Interest (Reg. BI), which applies to securities, and the National Association of Insurance Commissioners’ (NAIC) 2020 amendments to its Model Regulation, which aligns with Reg BI and is applicable to annuity recommendations, address the same conflict of interest protections sought by the DOL without restricting consumer access.

The NAIC model has already been adopted by 31 states, governed by both Democrats and Republicans across a diverse cross-section of America. Soon more states will join them.

Everyone should have access to a financial professional to help them with their retirement savings. And everyone should have the opportunity to protect their savings and create their own worry-free income stream with an annuity. A recent survey confirmed that Americans strongly value recommendations from financial professionals and oppose government regulation that would jeopardize access to them.

Now more than ever, the DOL should not advance a regulation that undermines the clear intent of Congress and the overwhelming desire of Americans to retain access to guaranteed income from annuities.

Jim Szostek

Jim Szostek is Vice President & Deputy, Retirement Security at the American Council of Life Insurers (ACLI). He helps guide ACLI policy on legislation and regulations affecting the U.S. retirement system. Prior to joining ACLI in 2008, he held positions at CIGNA and The Hartford.