Attorney: No Reasoning Behind DOL Treatment Of FIAs In Fiduciary Rule
April 12, 2016 by John Hilton
The future of fixed indexed annuity sales is up in the air after the Department of Labor added an unexpected wrinkle to its fiduciary rule. And a Washington attorney said he believes the rule should be re-issued as a result.
FIAs have always been afforded the 84-24 Prohibited Transaction Exemption, which classified them as an insurance product subjected to suitability standards of sale.
In the final version of the rule, the DOL peeled away FIAs’ PTE exemption and classified them with variable annuities, which are considered securities. VAs and mutual funds, which are currently also included in PTE 84-24, will be subjected to the tougher Best Interest Contract (BIC) exemption in the new rule.
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Industry analysts say the decision robs small savers of a crucial vehicle for accumulating retirement income.
“I am disappointed to hear that the DOL has lumped indexed annuities in with VAs under BICE,” said Sheryl J. Moore, an authority on FIAs and president of Moore Market Intelligence and Wink, Inc.
“Indexed annuities were a ‘back up plan’ for many variable annuity carriers. It appears that those plans may be changing,” she said.
In fact, FIA sales skyrocketed in recent months as carriers shied away from VAs. FIAs booked record fourth quarter gains and sales of more than $53 billion last year, according to Wink’s Sales & Market Report.
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