Opponents of DOL’s Fiduciary Rule Worried About Fate of Annuities
December 3, 2015 by Alex Padalka
The Department of Labor’s proposal to impose the fiduciary standard on retirement accounts is getting closer to its 2016 unveiling, in spite of many calls from the rule’s critics to stop or delay its implementation. But opponents are now worried about the effect the rule may have on — of all things — annuities, writes ThinkAdvisor.
Despite opponents’ lawmaking measures, such as Rep. Ann Wagner’s (R-Mo.) bill to force the DOL to wait for the SEC’s release of its own fiduciary rule, threats to attach riders to budget bills so as to strip the DOL’s ability to fund the rule, and pressure on the SEC to make the first move, most in the industry are resigned to the fact that a new rule will come out in 2016, ThinkAdvisor says.
However, there is assurance from Secretary of Labor Thomas Perez that the agency will make changes to the rule based on the extensive public comment period, the publication adds. To this end, several critics of the rule have been particularly vocal about its impact on annuities.
Variable annuities have been used to provide for lifetime income through IRAs. But the DOL’s rule would remove them from the prohibited-transactions exemptions, Cathy Weatherford, president and CEO of the Insured Retirement Institute, tells ThinkAdvisor. She suggests that the current best-interest contract exemption should be changed to accommodate the sale of annuities, reports the publication.
The National Association of Insurance and Financial Advisors has stressed that the DOL’s rule would lead to fewer annuities products getting sold and that this would harm low- and middle-income savers in particular, according to ThinkAdvisor.
In addition, Naifa claims the rule stands to put a bigger burden on advisors offering annuities to non-fee-paying customers, making annuities more expensive for them to sell. The organization argues that annuities should be available to investors instead of becoming harder to access, as some think they will under the DOL rule.
