An Obama administration offer to put an air hole for indexed annuity marketing firms in its fiduciary rule is a sham, insurance industry groups argue.
The administration's proposed exemption for independent marketing organizations is so narrow that it would let most suffocate, the groups say in comment letters sent to the Employee Benefits Security Administration.
Charles Anderson, executive director of the Washington-based National Association for Fixed Annuities, says a minimum size requirement included in the proposal would probably shut out most of the 200 or so major IMOs directly affected by the proposal.
"NAFA estimates that the proposed exemption will put hundreds of IMOs out of business, with each employing between five and 35 employees," Anderson writes. "Of course, many of these IMOs are NAFA members, and our association will also be harmed as a result."
EBSA, an arm of the U.S. Department of Labor, posted the IMO exemption proposal Jan. 19, the day before Donald Trump became president.
If EBSA's new fiduciary rule takes effect as written and works as drafters expect, it will require entities that sell financial products to retirement plans or individual retirement savers to show that they have put the purchasers' interests ahead of their own interests.
The IMO exemption proposal posted Jan. 19, for a Best Interest Contract Exemption for Insurance Intermediaries, would carve out room for some IMOs to get paid to distribute indexed annuities and traditional fixed annuities without violating the fiduciary rule.
EBSA has already created a BICE provision for insurers that sell products aimed at retirement savers. IMOs asked EBSA to create a similar exemption designed for them.
The Trump administration's EBSA has proposed pushing the effective date of the fiduciary rule back to June 9, from April 10. The administration could eventually kill or change the fiduciary rule, but it's not yet clear how Trump's DOL will proceed.
EBSA posted a collection of 33 IMO exemption proposal comment letters on the web this week. None of the letters comes from a consumer group, a regulator or a retirement saver who works outside the insurance industry.
