Fixing Fiduciary Rule Tops IRI Agenda for 2016
January 12, 2016 by Frank Klimko, Washington correspondent, BestWeek: frank.klimko@ambest.com
WASHINGTON – A trade group expressed cautious optimism the U.S. Department of Labor will amend a pending conflict-of-interest rule to address industry concerns that it would impose unfeasible professional standards on investment advisers, end commissions and disrupt the investment industry.
Fixing the new fiduciary rule is at the top of the priority list for the Insured Retirement Institute, President and Chief Executive Officer Cathy Weatherford said during a conference call on the institute’s 2016 agenda.
“I believe that you have an administration that is committed to have greater retirement savings in America,” Weatherford said. “We are hopeful that the DOL will make sure the rule maintains good access to lifetime security advice.”
Weatherford expects the DOL will post the final rule this spring.
Representatives have worried the rule would upend the market and spark an exodus of agents from the industry. Trade organizations were disappointed that lawmakers failed to address the rule in any end-of-session bills passed by Congress last year (Best’s News Service, Dec. 28, 2015).
Weatherford said another top priority is ensuring the passage of federal legislation to require private-sector defined contribution plans to disclose detailed information to participants about their retirement income.
The Lifetime Income Disclosure Act, (H.R. 2317/S. 1317), sponsored by: Rep. Luke Messer, R-Indiana, and Sen. Johnny Isakson, R-Georgia, would amend the Employee Retirement Income Security Act of 1974 to require information about both the lump-sum value of retirement accounts and what that sum means in terms of guaranteed monthly payments.
“It would provide a benefits plan statement on how your current saving or estimated savings translate into a monthly income,” upon retirement, Weatherford said. “This would give you the ability to see how your 401(k) translates to lifetime income.”
Research by the IRI found more than 90% of workers want these estimates and find them helpful. Additionally, more than 75% of workers said they would increase their savings level after seeing them.
Lawmakers should also permit electronic delivery to be the default option for providing required disclosures to plan participants as long as they can opt out, Weatherford said. Online delivery is both cheaper and more efficient.
As people are living longer, Congress needs to update the Required Minimum Distribution rules to reflect this new reality. Legislation should be enacted to increase the RMD age from 70.5 to at least 75, and mortality tables should be updated to reflect longer life expectancies, Weatherford said.
The IRI urged the president to move ahead with the appointment of a board under the National Association of Registered Agents and Brokers Reform Act. NARAB II is important because it establishes a one-stop, federal licensing clearinghouse for financial professionals holding state insurance licenses in multiple states, Weatherford said. Administration officials said the president is working on making those appointments, but has no time frame for releasing the names.
Further, the U.S. Treasury Department should finalize a rule, proposed in early 2012, that would make it easier for pension plan participants — when given the option of a lump sum or an annuity — to receive part of their benefits in the form of an annuity, Weatherford said. This rule will remove the all-or-nothing choice that plan participants now must make, she said.
“Our agenda identifies policy solutions to expand access to workplace retirement plans that help Americans save and prepare for retirement,” Weatherford said, “and to improve access to education and information that American savers need to make better and more-informed decisions regarding their finances.”
