Proposal Would Limit Consumer Choice on Lifetime Income Options,
Deprive Savers of Retirement Planning Advice
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) this week testified during the Department of Labor’s (DOL) public hearing on its fiduciary rule proposal that extensive changes are required to make the rule workable and avoid unintended consequences.
Representing IRI, Chairman of the IRI Board of Directors Nick Lane, Senior Executive Director and Head of U.S. Life and Retirement for AXA, stated that the rule as proposed threatens to limit consumers’ choice regarding lifetime income products including annuities.
Mr. Lane also explained how the rule would deprive many savers of retirement planning advice. “Unfortunately, we believe the proposal would significantly limit consumer access to these critical lifetime income guarantees through employer-sponsored retirement plans and IRAs at precisely the point in time when access to them is most needed,” wrote Mr. Lane in prepared testimony submitted to the DOL.
He later continued that if changes to the rule are not made, specifically to the proposal’s expansion of the definition of a fiduciary, then “the result will be that millions of Americans with modest means or who are just starting to save will not receive information and advice to help them plan for a secure and dignified retirement.”
Excerpts from IRI's comment letter:
- Core Principle No. 1
Financial Professionals Should be Held to a Best Interest Standard When Recommending Investments to Retirement Savers
As noted above, IRI supports the application of a best interest standard when a financial professional provides investment advice or recommendations to plans, plan participants and beneficiaries, and IRA holders. IRI believes the vast majority of financial professionals already act in the best interest of their clients, and recent IRI research found that nearly all consumers agree.1 The standard must be carefully crafted, however, to avoid any implication that acting in clients’ best interest requires that financial professionals must completely disregard their own interests in order to recommend the “best product” (which can only be determined with any degree of certainty with the benefit of hindsight years or decades after the recommendation is made) or the cheapest product (which would prevent recommendations of higher-cost products that provide guarantees or other features many consumers want and need).
- Core Principle No. 2
Consumers are Entitled to Freedom of Access to Retirement Income Guarantees
IRI believes it is in the best interests of American working men and women to have the freedom to shop the financial marketplace for annuity products and to procure a source of secure retirement income. Unfortunately, the Proposal would severely constrain individual access to annuity products based on the assumption that, “as a rule,” individual workers are too uninformed to look out for their own interests.2 IRI disagrees with the premise that all consumers should be pre-judged to be incapable of looking after their own affairs and that existing regulations do not appropriately require financial professionals to act in the best interest of their clients.
- Core Principle No. 3
In the Post-Defined Benefit Plan Era, the Availability of Guaranteed Retirement Income through IRA Rollovers Meets a Critical Consumer Need
As a result of dramatic declines in defined benefit plan coverage, coupled with the fact that very few defined contribution plans provide lifetime income forms of distribution, IRI believes individual annuity purchases through IRAs are, on a de facto basis, the primary means, other than Social Security, through which retirees procure guaranteed retirement income.3 IRI is concerned that the Proposal will effectively cut off access to guaranteed income products for most Americans at the exact moment in history when ready access is most urgently needed.
Mr. Lane’s testimony is based on IRI’s 52-page letter submitted to the DOL during the comment period. The letter details concerns with the proposal and outlines necessary changes to avoid unintended consequences. Along with its comment letter, IRI also provided an operational impact assessment conducted by Deloitte & Touche to examine disruption to the annuity market resulting from the proposal.
“Our goal throughout this process is to be constructive,” IRI President and CEO Cathy Weatherford said. “Through our comment letter and our testimony, we have outlined important changes to avoid certain outcomes that, though unintended, would harm retirement savers. Without these changes, the proposal will result in restricted and limited access to retirement planning advice and fewer choices for retirement savers.”
Click here to view IRI’s written testimony.
Click here to view IRI’s comment letter.